Rental Property Rates Should Remain Strong This Year

The latest jobs report’s effect on rental property

With the latest news out of Washington showing that U.S. employers added only about 88,000 jobs last month, compared with 268,000 in February,, residential investment rental property is poised to remain quite strong through the remainder of this year.  The latest Labor Department statistics reveal that this is the third Spring season in a row where employers cut back on hiring after starting the year more robustly.  And while the unemployment rate went down ever so slightly, from 7.7 to 7.6 percent nationally, the major cause appears to be that more workers were dropping out of the work force.   Clearly, not that many people were hired over the last month.

A dwindling work force

The work force of the U.S. has been dwindling for some time now – and stands at about 63 percent of the total U.S. population – a figure which has not been that low since 1979.  Retirement from baby boomers would certainly account for part of this figure.  But a large helping of psychological pessimism seems to be wreaking havoc with both employers and potential employees in such a lack-luster economy as we currently are in.

Probably the greatest drop in the worker participation rate can be attributable to young, new workers just entering the economy.  Many of those fresh out of college are rapidly giving up hope of finding entry level positions in their fields.  And in turn, they are choosing to continue their education on the graduate level, thereby deferring their entrée into the job market until a (hopefully) better jobs picture develops in the not-so-distant future.  Of course, in so doing, they take on more debt to finance their education, thereby showing a higher overall increase in outstanding consumer debt loads nationally.

Keep watching the unemployment rate

As I had mentioned in an earlier article, the unemployment rate will be one of the most important figures to keep a watchful eye on for the remainder of this year.  With the stagnant nature of today’s economy, and more workers feeling driven out of the work force, continue to look for overall U.S. rents to  increase as homebuyer malaise sinks in.  Housing valuation increases and continued drops in housing inventories and days on market are more a reflection of institutional property investors swooping in and purchasing massive amounts of foreclosures over the past year.  While displaying quite a positive sign for the housing market numbers overall, keep in mind that the general malaise in the workplace lurks right behind the cheery reports

Beware a false housing market rebound

Any rental property investor should be fearful that the housing market rebound will continue in its robust way.  Once the foreclosures are worked through, the overall psychological component of an unsettled workforce will play havoc on the housing arena.  And this means that the rental market should remain quite strong for the rest of this year, with landlords able to squeeze out higher rents as vacancy rates continue to edge downward.  So individual rental property owners should be able to see increases in their cash flow as the year progresses. Clearly, residential rental properties will become even more valuable than they were in 2012.  So it would behoove the individual property investor to continue to search for and acquire additional rental property for the remainder of 2013.

 

photos courtesy of flickr.com, sultharproperties.com, davegi.com, diegoviera.girlshopes.com, ericksonsdrying.com