Several of my readers have requested that I share my views on the future of the Albuquerque and Rio Rancho single-family rental housing market.  In my view, it is a great time to invest in income property in the metro area.  If you have cash for a down payment take a hard look at single-family income property in the metro area.  If you live in a single-family home and wish to move, look into renting the home instead of selling.  Every landlord dreams of investing while the house price is near bottom and selling when it reaches the top.  Below is a discussion of why I believe now is the time for the landlord’s dream to come true.

Nearly 100 million Americans, about one third of us, rent: Lawyers, painters, accountants, office workers, retail clerks, and doctors – they all rent.   There has been a lot of information in the national media lately about rising rental demand, especially as it pertains to the apartment industry.  Historically, a high apartment demand will spill over to the rental single-family home market.  There are two major drivers for increased rental demand in the Albuquerque and Rio Rancho market: situational and demographical.  I believe of the two the demographic trends will have a more dramatic and longer lasting effect on our local market.

The situational factors are caused by the state of the national economy.   Metro residents remain concerned that home prices could fall again, despite local board of realtor’s statistics that the median sales price in the metro area is stabilizing.  Job uncertainty fears remain high and tighter credit standards for montages are a factor.  Nationally, the U.S. Census Bureau data shows a drop in the nation’s homeownership rate to 66.5 percent in 2010 from 67.2 percent in 2009 and 69 percent in 2005.  Most economist expect this national trend to continue over the next ten years until home ownership returns to its historical levels of 62% -64%.  In the Albuquerque and Rio Rancho Metro areas the real estate cycle lasts historically ten years from the top of the market to the bottom of the market.  All indicators predict that today the single-family real estate market in the metro area is at or just above bottom.

I expect metro homeownership levels to return to their historical levels of 64%, at a much accelerated pace than the national rate, perhaps 3 to 5 years. I also expect the top of the cycle to hold true to history and to peak in 2020.  This acceleration will be driven by our higher than national average population of generation Y.  Generation Y is just now entering the job and housing market. The size of this group, combined with economic factors such as:  high unemployment, falling wages, high college debts and overburdened parents, will delay the move to homeownership several years from the proceeding generation X.  It was generation X that drove the recent housing bubble.  Generation Y’s will live with parents or in affordable apartments at record numbers, eventually moving into a single- family rental.  They will stay longer in a rental home before finally becoming homeowners. This supply and demand picture will create very high market rents for single-family starter homes.  Good news for investors and good for the housing market, as excess housing inventory will be converted to income property.  With higher returns, the landlord can hold the investment until the market peaks.

A second significant demographic factor is our positive population growth in all age groups.  Not only are the Albuquerque, Rio Rancho areas wonderful places to raise a family they are a growing retirement destination.  Our major employment base is secure, the state benefits from rising prices of oil and coal.  Further, we have excellent medical facilities and enjoy good weather. For now there are still single-family homes available at near bottom prices.  Given our demographics, I predict this favorable market for investors will not last much longer.  The big developers stopped building when the housing recession deepened.  To survive, as the market recovers, builders will restart the stalled housing developments.  There is a lag time between starting construction and bringing the new homes to market.  This supply and demand condition will drive home prices upward in the near future.  If you invest in rental homes right now, you should experience  higher rents, a bargain purchase and appreciating home values: the landlords dream come true.

Thank you for reading this post. If you would like to suggest a blog topic concerning Albuquerque and Rio Rancho real estate and property management markets, e-mail me at blog@ammre.com.