Multi Family and Household Formation

From the NAR:

In the broad landscape of commercial properties, the multifamily sector has fared comparatively better. Demand for space was modest but positive. Net absorption closed the year at 105,458 units. Yet, there are factors which caused adverse impacts in the sector.

The Mutli-Family sector almost always fares better in a downturn. Companies downsize and disappear, people generally don't. Everyone needs someplace to live and an increasing population softens the blow to these investments:

Household formation seems to be one of those factors. More precisely, the prolonged recession of the past two years has taken a toll on the number of people starting a household. Based on household formation data from the Census Bureau, the 10-year average of new households being formed has been 1.3 million per year. However, this number decreased significantly in both 2008 and 2009. From a decade-high of 3.5 million in 2001, household formation dropped to 772,000 in 2008 and only 398,000 in 2009.

That's actually the bright spot of pent up demand. A household is any separate housing space occupied by one or more people. The drop in household formation means there's a lot of people living together who would rather not, such as the adult child living in your basement. If the economy improves in any meaningful way, that log jam will begin to break and cause a spike in demand for rentals and purchases.

That's a big if, of course and the expected rise in interest rates along with the economy strangling uncertainty coming out of Washington could keep the markets going sideways for a while.

For what it's worth, Warren Buffet thinks the Real Estate market will start to rebound in 2011. OK. It's as good a guess as any, if not paricularly original.

Apartment Group Attacks Small Investors

Kenneth R. Harney at Realty Times reports that a lobbying and trade group representing large apartment owners is embarking on an ad campaign designed to frighten renters away from housing owned by small investors:

**"The National Multi Housing Council is mounting the campaign to warn consumers about what it considers the imminent dangers of renting with landlords who don't own many properties and don't offer "professional management."**

The NMHC then adds to their disgraceful scare tactics by using misleading statistics to dishonestly assert that 40% of all foreclosures are rental housing owned by small investors. They breathlessly warn that: "(I)f you choose to rent from a private individual, the risk of losing your rental home is very real,"

Have things gotten this desperate? I don't recall Mc'Donald's ever warning consumers that they are in imminent danger of getting food poisoning if they buy a burger at their local diner.

I wonder what the financial health of the NMHC's membership is? That could prove to be an interesting research exercise. How many of them might go bankrupt or into foreclosure if they haven't already?

Is the NMHC trying suck my tax dollars out of the bailout rathole? If they are, how much of that are they using to harm my business?

A lot of their members are publicly traded REITS and other companies that I'm sure many small owners are invested in. I'm very familiar with several of them through my 30+ years in this business. Small owners should let them know how they feel about this stupid and destructive campaign. I know I will.