homes for sale in huntsville al market outlook

Market outlook; Homes for sale in Huntsville AL
January 31st, 2012 10:21 AM

Huntsville AL Space and Rocket Center
Source Morgan Stanley, Cary Bay, Kristi Franks
Morgan Stanley Research released its latest real estate report, Housing 2.0: The New Rental Paradigm to provide market insights to investors. It’s interesting to know that the research team observes how more Americans have become renters instead of homeowners, attributing to different factors in the economy.
According to the recent Morgan Stanley report, there are roughly 40 million rental housing units in the country representing $6 trillion in asset value, half of which are single-family homes. The study explores how investors can participate in these opportunities and position themselves for the “change” The company released a report just a few weeks ago saying now is a great time for institutional investors to snap up distressed single-family homes and turn them into long-term rental units. The company says the properties don’t compete with the classic apartment rental property, so investors don’t have to worry about cannibalizing their multifamily rental investment portfolios to take advantage of the huge opportunities in single-family rental property ownership. What’s more, Morgan Stanley doesn’t see this shift to rentership as a temporary waypoint while the country sorts out its housing problems; it sees this as a fundamental shift in how the United States will define itself into the future.


Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.
Home price declines: not only are millions of homes available to investors at deeply discounted pricing but the low prices are changing consumer attitudes on housing as an investment Morgan Stanley says the U.S. home ownership rate, which has fallen to about 64 percent from close to 68 percent at its peak, is really closer to 60 percent when you factor in home owners who’ve stopped paying on their mortgage and only remain in their house because the bank hasn’t finished processing their foreclosure yet. Huntsville homes for sale Once these cases make it through the system, they’ll move to the renter side of the equation.
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings
When they do move to the other side of the equation, they’ll become renters of single-family houses, not of multifamily apartment units. That’s because these households, which tend to be a little older and often with children, want a single-family house in the suburbs, not a unit in an apartment building in the city. So, these households will be providing a big share of the demand for single-family rental houses into the future without necessarily adding demand to apartment rentals in the city.
To be sure, many of these households might like to buy again rather than rent given the historically low interest rates and deeply discounted home prices, but the reality is that many of these households simply can’t pass the credit score threshold. Financing is hard to get for the most creditworthy households today, so for credit-impaired households, renting is the only option.
While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan
While this single-family rental sector may appear at first to be of little consequence, by comparison to the product specifically designed, built and operated to this market, it is likely the most underserved rental segment of all. Furthermore, all indications suggest this sector will grow measurably in the coming years.
Morgan Stanley projects some 7.5 million more foreclosures over the next five years, what it calls “liquidated” houses, providing a golden opportunity for institutional investors to snap up properties for their portfolio and get into the long-term single-family rental business.
The average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.
If the company is right, then this is a great opportunity if you work with institutional buyers of real estate, whether on the buying, selling, or property management side. You have tons of inventory coming onto the market to sell to big buyers who will turn these into long-term rentals.
Distressed homes made up 32 percent of sales in December. Purchases by first-time home buyers declined in December Young buyers have become less eligible and are more concerned about stability of purchase values. Seniors have been migrating to lifestyle rentals in an effort to lower the burden of ownership and reclaim equity as a liquid investment. Combined, these will expand the number of rental homes the market will demand
If the job market continues to improve, then the rebound in consumer confidence will be sustained this year and more households will be willing purchase homes for sale in Huntsville AL If lenders simply dialed back their underwriting requirements to the sound policies they used before the housing boom, home sales would pick up, inventories would shrink, prices would start heading up in more than a few markets, and that 7.5 million in foreclosed houses Morgan Stanley predicts over the next five years will be a smaller number. And those that want to rent can rent and those that want to buy can buy rather than having to rethink their priorities in a new rentership society.
Foreclosed home sales closed at about 22 percent below market rate in December, a discount 2 percent higher than that recorded a year earlier The Morgan Stanley report concludes it would be more profitable to invest in single-family homes that you can use as rentals. Such homes can counter the effects of the housing bubble and further plunge in property values. More so, single-family rentals are also good for both equity and debt investors according to the report.
Although single-family homes may cost more than some other types of properties, more real estate investors prefer having greater privacy in the properties that they invest in. Single-family homes can also be expanded and many of them belong to communities with a homeowner’s association.
Best of all, single-family homes allow a real estate investor to hedge better. When it’s a buyer’s market, rents surge and one’s cash flow also increases. On the other hand, when it’s a seller’s market, the property’s value rises. This leaves the investor with the option to sell the property for a (large) profit or refinance the property to take some cash and/or get a better mortgage interest rate.
With reports like this, it’s pretty obvious that one can gain an advantage with rental real estate.
Across the country, more Americans are becoming home renters, and fewer Americans are becoming homeowners. The beginning of the rentership society is upon us. But all renters are not equal – of the roughly 40MM rental housing units in the country (representing roughly $6 trillion in asset value), about half are multi-family and half are single- family. In this joint report between our US Fixed Income Housing Strategists and US REIT research teams, with contributions from our Chief US Equity Strategist and Large-Cap Banks Analyst, we take a closer look at what the growth of the rentership society implies for both the single and the multi-family rental markets. What opportunities will be created? How will the two sides of the rental market benefit from this transition? What are the greater implications for those industries closely tied to the development and financing of single and multi-family housing? And most importantly – how can institutional investors participate in these opportunities and position themselves for this change?

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