How Housing Will Change Now that Millennial Buyers Dominate the Market

Dec 19, 2018

Original story: https://thinkrealty.com/housing-will-change-now-millennial-buyers-dominate-market/

The millennials are about to arrive in force on the national housing market, and, as usual, they are about to change everything. The first “fully digital” generation (although not all were raised on electronic devices like Gen Z) is emerging, finally, as a force to be recognized in housing. 10 years ago when the housing market crashed, many analysts predicted millennials, who were just coming of age during the financial crisis and the Great Recession, would become nomadic, opting to be risk-averse, rent instead of buy, and generally avoid homeownership as a result of watching their parents struggle with delinquent home loans and foreclosures.

Not surprisingly to most economists, however, millennials are, like their predecessors, warming up to the idea of owning homes. In fact, millennials have been the largest generational group of homebuyers (36% in 2018) for years now, although they have not necessarily wielded the most home-buying wealth (baby boomers still boast the highest median household incomes). As a result of this emerging influence over the real estate market and national issues with affordability in the “starter-home” tier of many major markets, millennials are changing not only what they want in a home they will own, but also the face of housing on multiple levels. In fact, millennial preferences in luxury housing and their definitions of said housing are playing a role across the spectrum in new construction, multifamily development, and single-family rentals and retail sales.

First-Time Homebuyers with “Move-Up” Taste

“The average millennial may not even buy a house until their mid-30s,” observed Bruce McNeilage, CEO and founder of Kinloch Partners and a southeastern developer dedicated to creating affordable housing options that are also attractive to this new generation of buyers. McNeilage invests in single-family rental properties that, on principle, he will sell to his tenants at any time, as well as building condo developments designed to be highly affordable to first-time homebuyers in the Nashville, Tennessee, area. The first of those condo developments, Solo East, was the fastest-selling project in Nashville’s history. McNeilage and his partners pre-sold the properties for $500 down.

“The buyers essentially created about $50,000 in equity at closing,” McNeilage noted, adding that a key part of appealing to this buying demographic is to offer certain “luxury” upgrades as standard. “When they see a product like Solo East or, now, Solo North, our latest development in the works, with granite countertops and stainless-steel appliances that is also less expensive in terms of the monthly payment than renting, those buyers are motivated to act, and act fast,” McNeilage explained. He noted younger millennial buyers, who are more likely to invest in condos instead of renting or buying single-family homes, find wood floors, tile bathrooms, and recessed lighting highly appealing. Solo North will also be gated, McNeilage said, adding to the luxury feel while retaining that highly affordable price tag (one-bedroom units start at $199,000 while median condo prices a year ago hovered well above that and are still climbing).

Reaching New Buyers with Build-to-Rent

For “senior millennials,” those already in their mid-30s, build-to-rent (BTR), buy-anytime properties may be more appealing than condo living, however. McNeilage observed for these buyers, “We buy or build brand new houses, rent them out, and those residents know they can buy any time. We also try hard not to raise our rents often, if at all.” Many residents stay in place for seven years or more despite being on month-to-month leases in many cases.

“I don’t like to hold anyone hostage. If you qualify for a mortgage and you want to buy your house tomorrow, I want you to do it,” he said. This also makes McNeilage’s developments highly attractive acquisitions for institutional investors, since most of the developments have a great deal of potential value thanks to their below-market rents. “By keeping rent payments low, we help our residents save money. They have a chance to save, to clean up their credit, to keep a job and to make that down payment. Every single thing I own is for sale at any given moment,” McNeilage said.

The BTR sector is emerging as a powerful new division of the real estate industry, with funding giants like CoreVest creating new , custom financing programs specifically for the developers of new rental property projects. The funding program targets seasoned investors seeking between $3 and $25 million in funding and offers long-term financing once the projects have stabilized. CoreVest , which prides itself for its position on the leading edge of financing, and similar financing services often serve as bellwethers for the housing sector since their new-product focus may indicate where “the smart money” is, literally, heading in the near future.

By Bruce McNeilage 14 Dec, 2023
In my interview with Seana Smith & Brad Smith from Yahoo Finance today we discussed single-familiy rental rates and my thoughts on mortgage rates going into 2024.
By Bruce McNeilage 14 Dec, 2023
Owner's equivalent rental prices rose 0.5% in November , a pervasive factor in US inflation as limited housing inventory continues to squeeze homebuyers out of tightened real estate markets. Kinloch Partners CEO Bruce McNeilage joins Yahoo Finance Live to weigh in on the outlook for renters and home purchases in 2024. Home prices are "not going to go down, that's for sure. And mortgage rates might go down, but if the cost of a house goes up $10-20,000, it's a wash," McNeilage states. For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live. 
By Bruce McNeilage 08 Nov, 2023
Original Story can be found here: https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ Charlene and Timothy Stratton traded in their 4-acre Illinois ranch for a rental home in the Nashville suburb of Spring Hill and, so far, they love the new low-maintenance lifestyle. Like a growing contingent of Americans, they chose to rent a single-family house rather than buy a home or rent in multifamily apartment buildings. "We lived in the country all of our lives with horses and cows," said Timothy Stratton, a retired airline mechanic. "But we wanted to rent because we’re looking at our age. We did a lot of research and decided this will work out for the time being." Families like the Strattons increasingly want the mobility and limited commitment of a rental, with the privacy and space of a single-family home. Meanwhile, many families are also being pushed out of the tight housing market. Housing affordability plummeted to historic lows this year, with only 23% of U.S. listings in April considered affordable to households earning $75,000 or less, according to the National Association of Realtors. In response, real estate investors are betting heavily on new rental properties and, increasingly, on standalone units — especially in the South. More than 61,000 fully and semi-detached single-family rental units are under construction in Southern states as of September. In comparison, 28,000 units are in production in the Western U.S., the next-busiest region, according to RealPage Market Analytics. Those units include single-family homes, townhomes, rowhomes, quadruplexes and duplexes. Single-family rental communities are increasingly concentrated in subdivisions with on-site maintenance, rather than in homes nestled in for-sale housing neighborhoods. The Nashville market has the ninth-highest number of in-construction, build-to-rent homes with 2,745 units in the pipeline. Phoenix tops the list with 21,676 units underway, a RealPage analysis in August found. "Construction isn't going fast enough in Nashville. If they built four or five new build-to-rent communities, they would fill them up immediately," said Doug Ressler, the business intelligence director of Yardi Matrix, a real estate data firm. "We really expect Nashville to continue to see growth here." Rent vs. own: 'More house for your money' Charlene Stratton filled the three-bedroom house with festive seasonal crafts and artwork she creates in her home studio. Renting isn't perfect, but there are real perks — like, when the air conditioner stalled on a Saturday afternoon in the middle of summer, the landlord offered to put them in a hotel until maintenance could fix it that Monday. "When something goes wrong, we just call them," Charlene Stratton said. "It's great." The Strattons live at DerryBerry Estates, one of the first of its kind, built in 2019 by Kinloch Parners. The 34-home community sits on former pastures with views of Spring Hill's rolling green landscape and rose bushes in the front yard. Local development companies like Kinloch Partners of Nashville and Franklin-based Chartwell Residential and Barlow Builders have made stakes in the industry. "In 2008, I had no competition. Now there are six or seven players in the market," said Kinloch Partners Co-founder Bruce McNeilage, who sold much of his inventory to American Homes 4 Rent and expanded to South Carolina. "We're 99% leased out." McNeilage said he prioritizes creating a calm, supportive community with competitive prices. Rents at DerryBerry Estates ranged from $2,300 to $2,600 for homes with three to five bedrooms in September. "People are starting families later in life and COVID-19 has allowed people to work out of their houses so people are moving farther out," McNeilage added. "Housing prices are going up and interest prices just doubled. You can get more house for your money if you get farther out." Housing in Nashville area: 'Can't build them fast enough' Chartwell Residential, a local real estate firm specializing in multifamily apartments, is now building out its first single-family rental home community. https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/ https://www.tennessean.com/story/money/real-estate/2023/11/08/renters-seek-new-options-in-nashvilles-tight-housing-market/70652968007/
By Bruce McNeilage 15 Jul, 2023
NASHVILLE, Tenn. (WKRN) — High prices and high-interest rates have kept many from buying a single-family home in a quiet suburban neighborhood. But what if you could rent one? Developers say they are seeing a big demand for build-to-rent communities. Upon first glance at the DerryBerry Estates subdivision, you might assume the single-family homes are for sale, but they are not—each one is a rental. “People are very happy with what we are providing,” said Bruce McNeilage, CEO/co-founder, Kinloch Partners. Bruce McNeilage built DerryBerry Estates in Spring Hill a few years ago. He saw some families struggling to afford a single-family home in the suburbs, but still craving that lifestyle. “Their kids are getting older, they want to be in good schools, you want to ride a bike around, and you just can’t do that in an apartment complex.” No sharing walls at DerryBerry Estates, or Fairview Station, the other rental home community Kinloch Partners built in western Williamson County. DerryBerry Estates subdivision has 41 single-family homes with 3 and 4 bedrooms and rents in the $2,300 to $2,500 range; and all the trappings of the suburban lifestyle. “They have front porches, they have covered back porches, two-car garage. They have all the amenities and appointments on the interior that one would want in a house for sale, but these are available for rent.” Who would be interested in an all-rental community? McNeilage said his tenants are often folks new to town testing out the neighborhood, young families who can’t afford just yet to buy, those looking for a low-maintenance lifestyle, and senior citizens, which make up 10% of his tenants. “They don’t want to live in an apartment and share walls with someone. They want to live in a single-family home in the suburbs to probably be real close to their grandchildren.” McNeilage has a couple of rental communities in Middle Tennessee, as well as out of state. And with housing prices staying high, he sees the popularity of rental communities sticking around “I could build 100 houses. I could build another 100 houses. I really have a demand that I can’t keep up with.” McNeilage said that his tenant turnover is lower than an apartment complex. People will stay in his homes 3-4 years on average, but for apartment complexes, it’s 1.5 years. 
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