Do Your Management Strategies Shift with the Changing Headlines?

Last modified on May 15th, 2015

Before diving right into today’s topic – How Should Property Managers Respond to Breaking News? – it’s important to clearly state that staying abreast of market trends is an essential part of property management. Unless you know what is happening in your local market – and on the national landscape – you can’t make well-informed decisions.

Having said that, it’s vital that you don’t make snap judgements based on those shocking headlines that seem to be everywhere today. Journalists, bloggers, and even a few real estate professionals, are focused on capturing your attention with headlines that make you want to read their news.

Looking at an article published on the Wall Street Journal Real Estate pages in November 2014 will help highlight things to watch for when scanning the real estate news.

The article titled “Rental Apartment Construction Is At a 27-Year High” described some of the significant and not-so-significant market changes based on information from the Commerce Department and other credible sources. While the title is accurate, relying on only one source for information is risky.

For example, this article doesn’t mention anything about other economic conditions over the same three-decade window. Our nation went through the Great Recession, exorbitant mortgage rates of the 1980’s, the bubble in the 1990’s and numerous market cycles and peaks. Another interesting tidbit barely noticeable in the article is the fluctuation between actual starts and permits issued. Property managers who focus too heavily on one stat or the other may miss subtle clues about current and future trends.

How Do You Stay Informed?

  1. Keep an eye on your local and national market research statistics. Prosperity – or sluggish activity – in metropolitan areas doesn’t necessarily reflect your local conditions. Right now many large cities are seeing a return to near-normal market conditions, while some bedroom communities and rural towns are still lagging behind. Naturally, that isn’t the case in every geographical region. In 2012, while many markets were struggling to achieve a balance between housing inventory and demand, places like Odessa, Texas were trying to overcome a severe housing shortage, primarily due to increased oil production and an influx of people coming to the area to take advantage of jobs promising higher than average wages.Why does an oil field boom in West Texas impact housing in say, Greenville, South Carolina or Las Cruces, New Mexico? People may leave your community for greener pastures if your local economy is struggling.
  2. Watch ancillary service sectors. Investors may sit on the sidelines and delay building if prices for supplies and equipment rise. Unless builders can see a clear path to achieve their revenue goals, they might not be willing to move forward with new projects or those sidelined temporarily to wait out current conditions.
  3. Remember apartment home occupancy, inventory and demand is cyclical. A close look at the Seattle, Oregon market shows that although the area enjoyed an expansion, with new people pouring into the area and rental occupancy rates dropping in the fall of 2014, concessions rose – primarily due to new construction.King County experienced a 9% growth in rent rates in 2014 compared to the same period in 2013, but overall the state reported the average annual rent increase since 1997 has been less than 4.0 percent. When the economy is strong – rental rates increase, but when conditions weakening, rate averages fall.

So what does all this mean for you as a property manager?

Managing multifamily properties isn’t for the skittish investor. The real estate market is volatile and it responds to a wide variety of stimuli.

It’s important to keep a close watch on your local economy and national trends; don’t just pick one or two experts to follow. When you read an article or study summary, check the dates behind the facts reported.

Perhaps the single most valuable strategy you can initiate is to stop skimming article content. Everyone is busy today and most people don’t take the time to read web content carefully. Before you panic – or celebrate – because a headline captures your attention, carve out time to dig down deep into the facts behind the hyperbole.


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