U.S. Needs 4.6 Million New Apartments by 2030

Growing Demand Due to Aging Population, Immigration, Delayed Home Purchases

According to a new study commissioned by the National Multifamily Housing Council and the National Apartment Association, delayed marriages, an aging population and international immigration are increasing a pressing need for new apartments in the U.S., to the tune of 4.6 million by 2030. It's important to note that:

• Currently, nearly 39 million people live in apartments, and the apartment industry is quickly exceeding capacity; 
• In the past five years, an average of one million new renter households were formed every year, which is a record amount; and, 
• It will take building an average of at least 325,000 new apartment homes every year to meet demand; yet, on average, just 244,000 apartments were delivered from 2012 through 2016.

Based on research conducted by Hoyt Advisory Services and commissioned by NAA and NMHC, the data includes an estimate of the future demand for apartments in the United States, the 50 states and 50 metro areas, including the District of Columbia. For the purposes of this study, apartments are defined as rental apartments in buildings with five or more units.

The increased demand for apartments is due in large part to:

• Delayed house purchases
  Life events such as marriage and children are the biggest drivers of home ownership. In 1960, 44 percent of all households in the U.S. were married couples with children. Today, it's less than one in five (19 percent), and this trend is expected to continue.
• The aging population
  People ages 65-plus will account for a large part of population growth going forward across all states. The research shows older renters are helping to drive future apartment demand, particularly in the northeast, where renters ages 55-plus will account for more than 30 percent of rental households.
• Immigration
  International immigration is assumed to account for approximately half (51 percent) of all new population growth in the U.S., with higher growth expected in the nation's border states. This population increase will contribute to the rising demand for apartments. Research has shown that immigrants have a higher propensity to rent and typically rent for longer periods of time. 

"We're experiencing fundamental shifts in our housing dynamics, as more people are moving away from buying houses and choosing apartments instead. More than 75 million people between 18 and 34 years old are entering the housing market, primarily as renters," said Dr. Norm Miller, Principle at Hoyt Advisory Services and Professor of Real Estate at the University of San Diego. "But renting is not just for the younger generations anymore. Increasingly, Baby Boomers and other empty nesters are trading single-family houses for the convenience of rental apartments. In fact, more than half of the net increase in renter households over the past decade came from the 45-plus demographic."

"Apartment rentals are on the rise, and this trend is expected to continue at least through 2030, which means we'll need millions of new apartments in the U.S. to meet the increased demand. The western U.S. as well as states such as Texas, Florida and North Carolina are expected to have the greatest need for new apartment housing through 2030, although all states will need more apartment housing moving forward," said NAA Chair Cindy Clare, CPM. "The need is for all types of apartments and at all price points."

There will also be a growing need for renovations and improvements on existing apartment buildings, which will provide a boost in jobs (and the economy) nationwide. Hoyt's research found that 51 percent of the apartment stock was built before 1980, which translates into 11.7 million units that could need upgrading by 2030. The older stock is highly concentrated in the northeast.

"The growing demand for apartments - combined with the need to renovate thousands of apartment buildings across the country - will make a significant and positive impact on our nation's economy for years to come," explained NMHC Chair Bob DeWitt. "For frame of reference, apartments and their 39 million residents contribute $1.3 trillion to the national economy. As the industry continues to grow, so will this tremendous economic contribution."

Other highlights from the report include:

Demand is expected to be especially significant in Raleigh, N.C., with a 69.1 percent increase in new apartment units between now and 2030, Orlando, Fla. (56.7 percent), and Austin, Texas (48.7 percent). Also notable, the demand in the New York City metro area will call for an additional 278,634 apartment units, Dallas-Ft. Worth, Texas (266,296 new units), and Houston, Texas (214,176 new units). Propensity to rent is higher in high-growth and high-cost states.

Hundreds of thousands of new rental units will be needed by 2030 in states such as California, Georgia, Arizona, Florida, North Carolina, Nevada, New York, Texas, Virginia and Washington.

By Monsef Rachid - World Property Journal 

The difference between your interest rate and the APR

Understanding the difference between annual percentage rate, or APR, and interest rate could save you thousands of dollars on your mortgage. But if you're like most homebuyers, you probably don't know that the interest rate and the APR measure 2 important, but different, costs associated with your home loan.

"I regularly work with clients who don't understand the APR," says Todd Huettner of Huettner Capital in Denver. "If they don't have questions about the APR or the Truth in Lending disclosure, where the APR is calculated, I know they simply didn't read it."

Interest rate and APR
The interest rate is the cost of borrowing the principal loan amount. It can be variable or fixed, but it's always expressed as a percentage.

The APR is a broader measure of the cost of your mortgage because it reflects the interest rate, as well as other costs such as broker fees, discount points and some closing costs. The APR is also expressed as a percentage.

Why have both?
"The main difference is that the interest rate calculates what your actual monthly payment will be," says Sean O. McGeehan, a mortgage sales manager in Chicago. "The APR calculates the total cost of the loan. A consumer can use one or both to make apples-to-apples comparisons when shopping for loans."

For example, a loan with a 4% rate will have a lower monthly payment than a loan with a 6% rate, assuming both are fixed for the same term. Likewise, the total cost of a loan with a 4% APR will be less than one with a 6% APR.

Where it gets tricky
Separately, the interest rate and the APR have their limits. But together, borrowers should be able to use both figures to determine their monthly payments, as well as their total costs. The trick, says McGeehan, is to understand the interplay between the 2 figures.

"If a consumer is only focused on getting the lowest monthly payment, they should focus on the interest rate," says McGeehan. "But if the consumer is focused on the total cost of the loan, then they can use the APR as a tool to compare the total cost of 2 loans."

This chart shows the interest rate, APR and total costs over time for a $200,000 mortgage in which 1.5 discount points cut the interest rate by one-quarter of a percentage point, and another 1.5 discount points cut the interest rate by a further quarter of a percentage point.

Time horizon matters
If you plan to stay in your home for 30 years or more, it probably makes sense to go with a loan that has the lowest APR because it means you'll end up paying the lowest amount possible for your house. But if your time horizon isn't that long, it may make sense to pay fewer upfront fees and get a higher rate -- and a higher APR -- because the total costs will be less over the first few years.

"Because APR spreads the fees over the course of the entire loan, its value is optimized only if a borrower plans to stay in the home throughout the entire mortgage," says Gloria Shulman, founder of CenTek Capital Group in Beverly Hills, California. "The key for looking at APR, as it is for many loan decisions, is time horizon. It's the most important question borrowers need to ask themselves before looking for a home and the mortgage that best fits their current and projected financial and family situations."

Figure the break-even point
If you're planning to stay in your home for a shorter period, Huettner says, you need to do the math and figure out where your break-even point is. Bankrate's mortgage point adviser calculator will help.

For example, if you chose a 0.25% lower rate for an additional 1.5 points because of the lower APR, but you moved in 5 years, you lost money, he says. Your break-even on the points was 7 years.

Unfortunately, those calculations can often be confusing for most homeowners, which is why it's crucial to pick the right lender.

"Interest rate and APR are important, but you should worry more about finding the right lender to explain your options and help you understand how they meet your specific needs," Huettner says.

By Michael Estrin • Bankrate.com

Pre-Approved vs. Pre-Qualified: What Mortgage Shoppers Need to Know

Getting approval on a mortgage is a process with no shortage of moving parts. That's why residential mortgage consumers need to leave no stone unturned in figuring out where tripwires lie on the mortgage-approval landscape. One area where home buyers run into problems is failing to understand the difference between being pre-qualified for a mortgage and being pre-approved for one.

Before the Great Recession, mortgage approvals were like ice cream flavors at Baskin-Robbins—numerous and easy to get. But in the last five years mortgage lenders have significantly restricted their offerings, and borrowers need to be prepared for the tougher requirements or risk being turned down by banks and other lenders.

Just because you are pre-qualified for a mortgage doesn't mean you will get one. But when you are pre-approved your chances for a green light from a lender are greatly increased.

What your mortgage lender looks at
"In general, a lender who prequalifies a buyer discusses a buyer's credit, income and assets with them," said Michael Minervini, a real estate agent for Re/Max in Red Bank, NJ. "A lender who pre-approves a buyer runs their actual credit and verifies their income and assets. That's a major difference since agents and sellers view a pre-approval as a more firm start to the home-buying process."

Cal Haupt, president and chief executive officer at Southeast Mortgage, explained what the pre-approval process means to homebuyers once it starts rolling.

"Your loan would be submitted for preliminary underwriting, which normally takes no longer than 24 hours," Haupt said. "Your mortgage consultant would then provide you with a pre-approval letter that defines the loan amount you are approved to receive."

"Pre-approvals are normally good for a 120-day period, so it's important to begin your home search with your real estate professional as soon as possible after receiving your pre-approval letter," he said.

The difference between mortgage pre-qualification and pre-approval
According to David Hall, president of Michigan-based Shore Mortgage, a mortgage pre-qualification is an initial assessment of a potential buyer, and often it's not worth the paper it's written on.

But a pre-approval goes deeper and involves a more thorough look into your income and expenses, including a look at your credit score.

"Let's think in terms of the view from a plane," Hall said. "The pre-qualification is a 250,000-foot view, and a pre-approval is a closer-up, 30,000-foot assessment of the eligibility of a client to secure a loan."

To help you land your dream home, try a pre-approval service like the one featured on the Realtor.com individual listings pages. By checking the box that says, “I want to get pre-approved by a lender”, you’ll be connected with up to three lenders right away.

The importance of mortgage pre-approval
There's no harm in getting pre-qualified—it's a good gateway to buying a home. But to lock down that home, focus on getting pre-approved, Minervini said.

"Buyers should always get pre-approved only," he said, "And here's why: First, a buyer can confirm the sample monthly payment that they may own when they close, and they can get an idea of the home's price range. Then, they can determine if there are any potential unknown credit issues that may need to be addressed prior to purchasing."

Why you should know the difference
Getting square on pre-qualified versus pre-approved streamlines the entire home-purchase process.

"If all parties involved are aware of the distinction, it helps everyone play their role to the best of their ability," said Ted Rood, a senior mortgage consultant with Wintrust Mortgage and a contributor to Mortgage News Daily. "The listing agent who calls the mortgage originator to ask if the buyer's income and asset docs have been examined clearly understands the differences between pre-qualifications and pre-approvals."

On the other hand, the mortgage loan originator who deals with the real estate agent has a better grip on the entire process, by providing clarity on the firm's pre-qualification or pre-approval process, he said.

Even homebuyers can leverage the distinction between the two processes to help their own cause.

"Clients armed with this information can request a thorough pre-approval rather than a cursory pre-qualification, and play a role in ensuring the best possible handling of their transaction," Rood said.

The takeaway for homebuyers? Know the difference between being prequalified and pre approved, and focus your energy on accepting the former, but aggressively seeking the latter.

Do that and you've taken a huge step in buying the home of your dreams.

Realtor.com