Vancouver Rental Surge Impacts Market

I have reported recently that the rental market in Portland has dropped dramatically. In fact the once red hot rental market in Portland has cooled to a healthy pace as tens of thousands of new units came online in that city. Now the typical rent for an apartment in Portland is LESS than similar rent in Vancouver. Portland median home prices are still 20-30% HIGHER than Vancouver, yet rents are lower.

Vancouver is also on an apartment building binge and thousands of new rental units are coming online here as well, with many more under construction or planned. Presumably this will soften the rental pricing here as well and that is a welcome change; or is it?

High rents makes owning more attractive. It isn't hard to sell someone on the idea of owning a 'real' house for $1700 a month versus renting a 3 bedroom apartment for the same. Honestly that's just too easy. When rents soften up, it is possible that demand for purchase housing will soften up with it.

There has been much reporting about the trends among millennials to rent rather than buy. Most of the data suggests that mobility is the primary concern. That is fine and well, sure most young people are not certain where they will end up. But the older half of the millennials are now in their 30s. They are settling in to that 'good' job. They are getting married and starting families. That is a stability inducing situation that lends itself to buying a home rather than renting.

Additional data shows that millennials are continuing the trend towards smaller family units having fewer children on average than any previous generation of Americans. Builders are still missing the mark locally producing large 3000 square foot homes with four or five bedrooms for a mass of upcoming families with one kid.

The market is desperate for classic "three 2s" and the builders are not delivering. This is why most of the market is a bit flat with very modest appreciation, but the bottom is still pretty hot with multiple offers on 40 year old 1400 square foot ramblers.

This is a great time to sell your classic ranch house and step up to that larger house or country property if that is your desire since the little rancher will get top dollar and the sellers of larger homes and rural acreage are softened up ready for a discount offer.

 

Gentrification of Downtown

Gentrification has become a 'dirty' word in some circles. For those unaware of this term, it is used to describe the redevelopment of older run-down areas into more vibrant and affluent neighborhoods. There are always going to be growing pains when this type of real estate turnover happens.

The funny thing about it is this. When neighborhoods are run down they rend to produce less income and thus taxes for local governments and often have a higher drain on local services funded by those taxes. People are often complaining about all the issues associated with these types of neighborhoods, increased crime, vagrancy, drugs, etc.

After the neighborhoods start to get redeveloped the local area often becomes more expensive and sometimes people that live there can no longer afford the rents / prices. This creates a whole new layer of complaints from constituents.

When old industrial areas are converted to residential, this is less of a problem sine no one "lived" in the abandoned industrial areas. One might think of Portland's South Waterfront or Vancouver's new waterfront. But ultimately these areas create a sphere of affluence around them putting upward pressure on rents and property values in nearby neighborhoods.

It often becomes the classic scenario of pleasing one group by pissing off another. For local governments chasing tax revenue the choice is easy, gentrification benefits the community at large so long as the local elected officials use the new found tax wealth to benefit the community at large. Sometimes that happens other times not so much.

In general Vancouver USA will benefit from the gentrification of Downtown and surrounding areas. What is most important for those who feel they may be on the pricing bubble is to buy while you can. As values push upward, those who bought will benefit greatly where as those who continue to rent will find themselves on increasingly thin ice. Soon they who choose to rent will become the voices against gentrification. Yet often they were the voices against the run down, crime infested neighborhoods that are being fixed.

The moral of this tale is that if you want to be able to stay in an area that is rising up, you better buy while you can. Often in these rising value scenarios renters have to move, owners choose to move. That is a big difference.

Vancouver's Aggressive Apartment Construction, What does it Mean?

Vancouver is undergoing a major construction boom on apartments with some 800 units under construction and another 3700 in the pipeline. What does this mean for local real estate? The rental market in the greater Vancouver area has been under severe pressure as neighboring Portland has also had a huge crisis in the apartment market. That city is also pushing a fat pipeline of some 7000 units under construction and 15,000 proposed. The Portland crisis has spilled into neighboring cities like Beaverton, Gresham, and Vancouver driving demand higher here as well.

Rents were out of control for several years recently and that helped push the entry level real estate market to the brink of un-affordability. Now with some of the pressure off the rental market the housing resale market will likely settle in a bit. Frankly this is probably a good thing. As it is now, appraisers are a month out and lending may tighten a bit after the election.

Sellers in the entry level market under median ought to sell now and capitalize on a mini-peak in the sub-median market and get that mid market home while these super low rates are still in play. Renters still can buy a small house for not much more per month than the price of a two bedroom apartment. This is still a good time to buy with these low FHA and VA rates in the low to mid threes.