Hey, guys, it's Ken.
So today we're going to talk about why I think a lot of the next
generation is going to be stuck in rentals potentially for life.
So there's no way around it.
America is definitely becoming a renter nation.
I'm going to show you the statistics going back to 1980 in a minute.
With homeownership becoming less and less affordable.
Would be homeowners are now renting while they wait
for prices to come down or adjust.
Unfortunately, with the housing costs as high as they are, many,
many Americans are becoming Long-Term renters
and some will never, ever be able to reverse that.
Stick around to the end, because I'll also offer you some advice on what to do
if you're renting and you're falling behind on your rent
or if you're a landlord to stay on top of some of the things that you can also do.
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So like I said, America has become a nation of renters.
A percentage of U.S.
households that are renters went from thirty one percent
and twenty-six to thirty six percent in 2016.
And the numbers are continuing to grow.
Meanwhile, home prices have been going up and up
and up with so many people unable to buy.
Demand for rentals has increased.
What we're seeing now is that the ripple effect is also causing rents
to rise significantly, which never happened during the pandemic.
Boise, Idaho, is the strongest example of this.
A lot of people have been moving to Boise
from bigger and more expensive real estate markets up and down the West Coast,
and that has caused huge increases in the cost of single family homes
and now apartment rentals.
Rents in Boise have increased more than anywhere else in the nation
from a thirty three percent year over year increase from just one year.
While the size of the increase is exceptional.
Boise is not alone.
Spokane, Washington also saw rents surge
during that same time to the tune of twenty nine percent.
Right now, the national average year over year rental increase is over 10 percent.
The cost of rentals is likely to keep staying high with corporate giants
entering the single family housing rental market in June of this year.
The investment giant Blackstone acquired Home Partners of America, owner
of more than seventeen thousand houses across the US for six billion dollars.
Unfortunately, this is probably only the beginning
of giant corporations buying up smaller residential properties.
Once this seems like a viable business model
to other companies, we will likely see other companies following suit.
Unfortunately, while renters are hoping rent prices will fall,
it appears they are ready to rise much further.
The rental market is facing severe shortages, heightened
demand and high prices as home prices skyrocket.
The good portion of the population is being priced out.
One thing that I would encourage you to go look at is the National Multi
Housing Council or NMHC.org on their website.
You can click on a study that was done in two thousand and seventeen.
In that study, they said that we will need three hundred and twenty
eight thousand housing units just to keep up with demand.
And guess what? We've only done that three times since 1989.
So there's always been a shortage of housing built compared with the demand.
So how did we get into this housing shortfall in the first place?
While the pandemic spurred a lot of buying and a lot of people relocating,
those aren't the only reasons we're in this situation.
The major cause of the shortage is, again,
that we weren't building enough for the years prior.
The US built an average of 276K fewer homes per year,
between 2001 and 2020, compared
with the period between 1968 and 2000,
according to another report by the National Association of Realtors.
If building had kept up, there would be
at least 5.5 million more units of housing.
The report estimated.
So here are the reasons why there was a construction downturn.
Part of this is because of the Great Recession.
So now I want to take a look at homeownership, as you guys can see.
I started at 1980 because that's when I was a kid and kind of came
into the rental real estate market and multifamily market in the late 80s.
And so I experienced most of this.
And I'm going to give you a prediction for 2025 as to what I think might happen.
So there's lots of reasons that homeownership rates
go up and they go down.
Obviously, construction costs and labor costs
and materials costs, interest rates.
But on the other side of this, of course,
because this is a real estate channel, and primarily we have a lot of people.
They're interested in rentals.
The other side of this are obviously renters.
I believe that this is going to continue
to grow significantly into what I call a renter nation.
And I think a lot of people are going to be trapped as renters
for the rest of their life.
So here are just some of the reasons why there was a construction downturn.
Part of that is because during the Great Recession, in 2005,
so between 2005 and 2010, the housing industry suffered a net
loss of one point five million jobs, reaching
its lowest point in 2011.
And since 2011, employment in this industry gradually
increased, but has never increased quickly enough to keep up with the demand.
The ongoing labor shortage
has also been cited as either the number one or the number
two business related challenge for builders over the last five years.
So according to the National Association of Home Buyers, in addition to labor
issues, the cost of materials was already on a steep increase before the pandemic.
The NAHB, or the National Association of Home Builders
said that the lumber prices increase in 2018,
not '20 by sixty three percent, adding thousands of dollars
to the cost of a newly built home in 2019 other building.
Material prices for items such as steel and copper also increase.
The cost of materials has become
an even bigger deterrent to new construction this year.
Single family home construction dropped 13 percent between March and April.
So one of the major repercussions of high rents and housing costs
will be similar to what we saw in the wake of 2008.
More people will move in with family members, parents,
grandparents or look for roommates to cut overhead costs.
People will search for affordability.
So where does this leave people who haven't even been able
to keep up with the home they're currently renting?
This continues to be a big problem.
Currently, over 15 million people live in households that owe
as much as 20 billion to their landlord, according to the Aspen Institute.
As of July 5th, roughly three point
six million people in the US said they faced eviction.
And the next two months when the pandemic began, the government
leaned heavily on many landlords to cover their tenants obligation.
While some of the bigger real estate corporations received infusions
of stimulus cash, small landlords had a harder time receiving the aid.
So if you're in a situation where you're still behind on your rent
and you have been communicating with your landlord, you need to do that right away.
You have to impress upon them that you have experienced
real estate hardship and are working to get current on back.
Right. If landlords know that you are motivated to pay what you will.
They will be a lot less inclined to proceed with eviction.
The next thing that you need to do is find out what sort of rent
relief programs in your city and state are they're offering
and make sure that you apply for whatever help you need .
You will also want to let your landlord know that you are actively
taking steps to pay them because these programs are not quick.
Unfortunately, the bureaucracy
surrounding rent relief has kept a lot of it tied up.
Billions of dollars have been earmarked for rent relief, but
so far it's not necessarily all getting in the hands of the people who need it.
For example, in New Orleans, barely one sixth of the nearly 17,000
people applying for rental aid have received money.
As of August 2nd, there are similar issues in areas like New York,
where 75% of the rent relief has yet to be disbursed.
So now let's focus on the chart real quick.
And I think it's just important to know
it doesn't really matter. Obviously, what administration is in place.
So in the 80s, we had Reagan and then we moved into the Bush era.
And what happened here, as you can see specifically
right here, is that Bush had.
A mandate on home ownership,
so what he was trying to do and he believed that everyone
should own a home and what it did was it shrunk the rental market.
That's exactly what it did.
Then, of course, in 2008, 2009, 2010,
we had the fallout and it reversed
and they said that every one percent equals about a million people.
So you imagine as these numbers start to fluctuate back and forth, it's
important to watch them because as we went from 64%
to 69% back down to, say, 63%.
That's six million people that got displaced back into the round up four.
And this is actually what has going to create
the high rent increases that we're starting to see.
And as we've already talked about, there's not enough inventory to replace us.
So my prediction as of right now, we're at about 65%
homeownership, which means that obviously we're about 35% renter.
But I think for the first time ever, we're going to be in the 60s.
And we're actually going to move to over 40% renters.
What that's going to do, guys.
It's going to put a massive, massive amount of pressure and demand
on the existing stock of rentals, and it's going to drive rents through the roof.
So if you're a landlord, you better take note.
Hold on to your properties. Buy more.
Make sure they cash flow.
Make sure you have a fixed rate debt.
Because I think you're going to see a heck of a ride here as a landlord.
It's not necessarily good for the renter,
but it's definitely good for the landlord.
And I also believe that then the government going to help step in
to try to offer some assistance around all of this.
So once again, thanks for watching.