Buying homes and renting them are such distinctly separate aspects of Santa Barbara real estate scene that we tend to pay attention only to the sector we are most involved with. We pretty much ignore the other. Renters and real estate investors watch trends in residential rentals, while homeowners and soon-to-be homeowners check on prices and activity in the Santa Barbara and Montecito home market.
All of which means that it’s easy to overlook how trends in one sector have major impacts on the other. And any sort of residential construction activity – new building or remodeling – has a direct and positive impact on our economy as a whole.
So here’s some good news: this year, rental construction is expected to reach its highest level since 2005. Somehow that may not seem like such a big deal, but despite the way it looks, 2005 is SEVEN years ago (time flies, doesn’t it?)! Those have been seven painful years for most of the construction folks we know, so the change comes as welcome news. It’s also possible that a turnaround could mean that other turnarounds in different areas of the economy may be in the wind.
The apartment experts at NMHC just published something that most of us already suspected. They found that nationally, apartment vacancy rates fell to a decade low of 4.9%. We have already written about how asking rents continue to rise (in April, up .5% from the previous month). The same experts noted that some empty-nesters seem to be increasingly likely to opt for the convenience of apartment living -- even those who could easily afford to buy.
It explains why more investors are stepping up to order the building of new rental homes even as many older apartments and rental homes are being renovated. Add to that recent government moves to encourage lenders to become at least temporary landlords, and the result is real activity. Budgets have been tight for families in recent years, which may have caused them to decide to choose rental homes that were older, hence less expensive. If the economy continues to strengthen, these same families may later be able to afford to look at one of the new rental homes now under construction. It’s likely that many tenants would choose to live in a place that is a product of new construction, or in a complex that has been recently renovated.
All that increased building activity is another sign that the housing market as a whole is waking up in the Santa Barbara area. In the longer range, since newer rentals generally cost more money, more would-be tenants will ultimately reconsider the prospect of owning a home – in turn increasing demand for first-time or entry level homes.