So Rent Is About to Accelerate

That Apartment Building Boom Is Slowing— In a research note out Tuesday, 

Goldman Sachs economists suggested a February slowdown in housing inflation was likely temporary.

In the March consumer price index data released Wednesday, they were proved right.Goldman’s analysis was concerned with whether the rental industry would be able to weather the ongoing glut of new construction, and they believe it will.

That’s good news for landlords, but not so great for renters.

The Labor Department’s CPI tracks housing price inflation several ways. Housing costs for both renters – the category known as “rent of primary residence” – and for owners, a metric called “owner’s equivalent rent” – both accelerated to a 0.3% monthly gain from 0.2% in February.

In the 12 months ending March, rent climbed by 3.6%.

As Goldman explained it, many analysts have assumed years of robust building of apartments, particularly in expensive cities, would eventually slow increases in the cost of rent. But, the economists wrote, “the pipeline of new projects appears to have peaked. 

Additionally, a rise in cancellations/project delays (akin to the 2005-2007 experience) may slow the pace of completions going forward. Most importantly, the rental market has been able to absorb this decade-high pace of new supply without a significant increase in vacancy rates.”

The Labor Department also reported Wednesday that average hourly earnings rose 2.7% for the year — continuing a years-long trend of rents rising faster than wages. Many tenants have “absorbed” rising rents because they have no other options, but hefty rent payments crowd out other spending. They also make it difficult to save for down payments.

Builders step up their outreach

The construction industry has begun to take action to feed its need for workers. 

That should give the home buyers of tomorrow a sliver of hope.

For example, the Home Builders Association in Colorado Springs, CO, recently partnered with the local school district to start a vocational program in six schools. Called Careers in Construction, it instructs over 350 kids in carpentry, plumbing, HVAC, and electrical trades.

'We’re giving them a choice because not all of us are meant for college,' says George C. Hess III, CEO of Vantage Homes Corp., a Colorado Springs–based builder, and chairman of the Home Builders Institute, an educational trade group.

On a grander scale, Home Depot recently pledged $50 million for HBI to support a Pre-Apprenticeship Certificate Training program. It provides vocational education not just in schools but also on military bases.

“We know the younger generation is where we start to overcome perception and make the trades cool again, if you will, so we can have that pipeline continue over the next several decades,” says Shannon Gerber, executive director of the Home Depot Foundation. #RealEstateForSale #Homeownership #Rentals #NewConstruction

source: Realtor.com