Community Corner
A Nation of Landlords and Other Trends for 2012
Industry experts predict top 10 residential real estate trends.
After several difficult years for the industry, many in real estate are looking to 2012 with much anticipation. Will this year bring the return of the for-sale market, or will rentals reign? What features will emerge in home design, and how will buyer demographics change? Below, Chicago-area real estate experts weigh in on what ten trends to expect in what all agree should be a very interesting year for the industry:
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A Nation of Landlords: After years of waiting for the for-sale market to rebound in order to move up, many homeowners will become landlords in 2012 by renting their current home in order to move to a new home, said Brian Brunhofer, president of Meritus Homes. “This is a concept buyers have become far more comfortable with as they’ve seen the attractive rents they could get from their current home. It allows them to make a move they may have been putting off for years,” he said. “It’s a smart option for many of our buyers, as they can hold onto their current home rather than sell at a loss, while still being able to move into a larger house that better suits their needs.” To help new homebuyers adjust to their role as landlord, look for more builders in 2012 to follow in the footsteps of Chicago-based Lexington Homes, which has a program with Marketplace Homes that allows buyers to purchase a new home while leasing their current one. The program works by providing a “guaranteed lease” for an existing home for up to six years. Homeowners will receive the guaranteed rental payment every month, even if there is no tenant. Marketplace will do all the legwork finding tenants, as well as cover the home’s utilities, maintenance, and repairs. And if Marketplace Homes sells the home during the term of the lease, the owner will get 100 percent of the asking price.The landlord trend is something MACK Companies, the Midwest’s largest redeveloper of foreclosed properties into single-family rentals, sees as the fastest-growing aspect of its business in 2012. The company’s Real Estate Cash-Flow & Appreciation Program (RECAP) gives investors who want to own real estate – but don’t have the time, expertise or knowledge of property management – the opportunity to purchase already redeveloped, tenanted and cash-flowing properties. “With the number of foreclosed properties expected to hit the market next year, we see an even stronger demand than this year among real estate investors to become ‘hands-off’ landlords,” said Jim McClelland, CEO of MACK Companies.
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Rentership Society: Recent census data shows a continued decline in homeownership rates. “We see this downward trend in homeownership rates continuing into 2012 and beyond. We are in the process of a shift from an ‘ownership society’ to a ‘rentership society’,” said Jim McClelland, CEO of MACK Companies. “That means good things for the rental side of the market in 2012 and beyond. We predict single-family rental homes as a particularly bright spot, driven by the millions of families who either lost their home to foreclosure or simply can’t secure a mortgage. And we’ll see more investment in distressed single-family homes to rehab them as rentals, both from individuals and REITs.” “Even people who have the means to purchase will continue to rent, and we’ll see not only a rise in occupancy rates, but also an increase in retention,” said Anthony Rossi, president of RMK Management Corp. “People are unwilling to take the risk of purchasing in this climate and find renting a much safer and easier option.”
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Location Tops the ‘Must Have’ List: In the “boom” days pre-2007, buyers were more willing to sacrifice location for more space or high-end features, but that is no longer the case. Homebuilders say location will be what drives new-home decisions in 2012 and beyond.“It’s not enough for a home to have a good location, it has to have a great location, or buyers won’t even consider it. They want transportation, retail conveniences and good schools or the home is off their list,” said Jeff Benach, co-principal of Lexington Homes. “Today, buyers who don’t even have kids want to be near good schools. And the days of buyers willing to accept a long commute to work or the grocery store are over. Buyers want to run out for ice cream and still have it be frozen when they get home.”
Renovations Rule: Whether buying or renting, people will have little interest in homes that are not renovated, said Rick Croce of Smykal Renovations. “That means if you’re a seller, you need to make the investment in not only replacing things like a roof and windows, but also giving the home a facelift to make it more modern,” he said. “People are looking for open floor plans, well-designed kitchens and attractive baths, so it is worth considering making such renovations to your home before putting it on the market – even if you don’t plan to sell for a few years.” The same holds true for the rental market, said Jim McClelland of MACK Companies, which manages more than 500 single-family rentals in the Chicago area. “While rental demand is high right now for single-family homes, quality still counts. People aren’t interested in old, outdated homes. It’s important that smart renovations are made before trying to rent a property in order to find a good tenant and top dollar for your rental income. On average, we invest $50,000 into each of our redeveloped properties to bring them up to new-construction standards.”
The Human Touch: “People love social media, but there is no replacement for person-to-person contact,” said Anthony Rossi, Sr., president of apartment management firm RMK Management Corp. “People want to feel that connection, to have an actual person to go to with issues or to rely on for information. I predict we’ll see more transparency and less ‘mass email’-type of interaction in the real estate industry in 2012. Personal relationships will be very important.” To encourage more personal interaction and make it easier for people with busy work schedules, RMK’s rental communities are open late two nights per week so the staff is available to answer questions, accept packages, discuss renewals, or just visit.Brian Brunhofer, president of Meritus Homes, agrees. “As a family-owned company, we put a huge emphasis on creating a personal connection with all buyers. That is actually part of why we recently launched a corporate Facebook page. It gives us even more opportunities to connect with homebuyers on a real-time basis, share photos of our team and homes under construction, ask and answer questions, begin a relationship with interested buyers and continue to foster friendships with current residents,” he said. Brunhofer added that he wouldn’t be surprised to see more builders beef up their sales force in 2012. “From day one we’ve had our sales centers staffed seven days a week, but I know that wasn’t the norm for everyone in 2011,” he said. “Budgets were tight for builders this year, but I think many of them realized you can’t make a sale if you’re not there to answer the door or phone. This business isn’t just about building homes, it’s about building relationships.”
This information is from a press release provided by Taylor Johnson.
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