‘The Accidental Economist’ with Jack Kern: Ordinary People
- Jul 07, 2011
I was in a long line at the grocery store the other day and started speaking with the person in front of me. We started remarking about how high food costs had become and what a dent it was making in summer plans for lots of people. After exchanging some pleasantries, it came out that I do investment research for a living and I was asked if I had any good stock tips. I’m pretty used to this and so I recommended the peaches, which were on sale this week.
For the past four years I’ve been in practice, the focus has been on how multifamily would be affected by the recession and whether or not owners would be able to survive the recovery. Along the way we were treated to an avalanche of reports on foreclosures, failing single-family home markets, and what was supposed to be a rush of new renters, previously from foreclosed homes, filling up apartment communities. It did occur to me that a lot of that happened, but not in the way it now seems to be popularized. I think it’s a good idea to reset how the stage looks and really focus on the new world order in rental.
When I was at a National Multihousing Council meeting in 2007 and markets were beginning to show softness, Clyde Holland of Holland Partners Group famously stood up and decried that we’re in for a tough couple of years, but it will be rental heaven in 2011. To my knowledge, other than our own forecasts of about four years of distress, Clyde was the only major owner to publicly acknowledge what everyone else was feeling. Even Steve Liesman, noted economist from CNBC and a very astute guy, had his own take on this, which focused more on Federal Reserve policy than industry practices. Steve, you were right, but for some different reasons.
The people who rent apartments are not objects of study and derision for homebuilders, but instead just ordinary people who need a place to live. The decisions may be based on school districts, proximity to work or transit lines, but inevitably as a point in time observation it’s important to remember that renters, whether by choice or economic circumstances, are now filling up communities. The media attention has treated this class as refugees from foreclosure, or recently employed middle- to high-wage earners, or in some more humorous instances escapees from their old rooms at Mom and Dad’s ancestral home. Oddly enough, a lot of renters come from homes being rented, so it isn’t surprising they seek similar shelter.
I’m not a fan of “shadow” markets because the data indicates that there have been rental households going back to much earlier periods than the 1800s. For me, the interesting part of this is the perception of who the new renter is, and that’s what I’m going to be writing about for most of this summer. With the completion of some of our surveys and other market studies, we’ve probably never been in a better position to share insights with you, so starting next week, we’re going to take all of this apart and show you what’s really going on.
Until then, I hope your lines at the grocery store move more quickly than mine do and occasionally they put more items on sale. That would help everyone.
Jack Kern is the managing director of Washington, D.C.-based consultancy Kern Investment Research, LLC. Formerly the head of research at Archstone-Smith, Jack has been in the news a lot lately giving opinions about what Archstone is going to do next. Lately he’s been thinking about hiring a guy to start his car.