Why Aren’t Home Builders Building?

This was the headline in a recent post in REALTOR Magazine this week.  There were several reasons cited in the article.  Leading the list among them were increasing regulations regarding building.  The article stated, but did not identify what kind of regulations were adding to the cost of building new homes but the cost was estimated to have increased to 29% of the cost of construction over the last five years. I assume this means not only implementing the regulations but also finding the hardware and training craftsmen to make the changes through trail and error.  These costs can include building around trees, impervious cover, set back requirements meaning less land to build on, the height of door handles and light switches all of which have to be designed and then implemented, and the list goes on and on.  Additionally builders are citing the lack of suitable labor and the increasing cost of lots to build upon. 

My take on all this means that if you own a residential rental right now that you are in a good place.  Take all of the above, now factor in the rising interest rate and probably more to come, and the lack of folks to save for a down payment, and you have a lot more people needing to rent vs. being able to buy a house.  Now add in the millennials who have a penchant for “wanting to rent” as a life style choice vs. having to rent, and this throws more prospective renters into the market.  So with a shrinking inventory or rentals, say in the Austin area, and a bunch of folks moving here to take jobs, coupled with the millennials and with those who can’t afford to buy a house and you get rising rental rates.

Just a few good reasons for owning Austin area residential rentals!

Rick Ebert / Austin, Texas / 23 Dec 16