Renters outpacing homeowners locally and nationally

Sept. 20--Ashleigh Brents and her fiance are a month away from their wedding and just completed a move into a two-bedroom rental home. They searched for months as the lease on their $800-a-month, one-bedroom apartment neared its end.

They wanted something bigger and in the same area. Finding what they were seeking proved difficult.

"The rent in the apartment was ridiculous," Brents, 23, said. "We wanted a place that was reasonably larger with comparable rent."

They finally found a condo-type two-bedroom just down the street from their apartment for about $100 more a month, and they have a long-term goal to save enough money to buy a starter home.

Ms. Brents' search is not uncommon in Tyler, where homes and rentals are in high demand.

Tyler builder John Nix described the outlook for local rental properties as "unbelievable." Demand continues to grow and with a diverse local economy, he doesn't expect it to slow.

"We are seeing such strong growth in our local university and colleges and in jobs available," Nix said. "In the next few years we are going to see increased needs locally in medical call centers as well as medical billing fields with no slowdown in the overall medical community. Couple that with our retail hub status, as well as a very strong oil support and administration industry, (and) the demand for housing of all types will continue to be in high demand."

GROWING DEMAND

The housing demand is a topic among developers who are looking to invest in a hot market. Demand from renters is putting pressure on developers to meet the growing need.

The occupancy rate for dozens of area apartments surveyed by the Tyler Apartment Association showed average occupancy rates at almost 92 percent for the last quarter in 2014. That is down slightly from the previous quarter, when the average occupancy rate was 92.5 percent. The three prior quarters dating back to 2013 showed occupancy rates were below 90 percent but steadily increasing.

Meanwhile, average monthly rental rates also were steadily on the rise. Single bedroom rental housing, including efficiencies ($539) to 900-square-foot apartments ($838), averaged $684 compared to a $679 average in the first quarter.

In Waco, a similar-sized city, occupancy rates for 2014 were 90.5 percent with an average monthly rent of $719.

Nix said Tyler is a relatively inexpensive place to own property, and city services and insurance rates create lower overhead for investors.

There is a growing population of "renter by choice," people financially able to buy a home yet choose rentals, he said.

Renters have begun outpacing homeowners in national and statewide trends.

Tyler developer Sam Mezayek said there are varied reasons why rentals are outpacing home ownership.

Mezayek said a major contributor to a rise in renters has been the Dodd-Frank Act, which was a federal response to the mortgage crisis and increased the scrutiny of qualifiers for mortgage loans. Less access to mortgages means families and individuals who want to buy a beginner home may have to wait.

Mezayek said the trend also is associated with a "live for today" mentality of younger generations who don't want to be tied to a 30-year mortgage. Renters of various age groups are forgoing traditional homeownership because renting requires less responsibility, such as lawn care and maintenance, and provides freedom of mobility.

Mezayek said his company just completed a 70-unit townhouse community on Cumberland Road that is 100 percent occupied and has a waiting list. The company also is building a 112-unit development with similar designs, including two-car garages and fenced backyards.

"We couldn't do that if we didn't have confidence in the market," he said.

RIPPLE EFFECTS

Tyler's rental market has grown during the past five years. Since 2009, 1,688 new single-family rentals, from townhomes to apartments, have been added to the Tyler housing market.

But with 3,500 residents moving to the area each year and the looming employment boom, there are questions about housing availability and affordability.

The Tyler economy has hummed along with steady growth for the past three years. Signs, such as the unemployment rate (4.1 percent in late June compared to 9 percent in 2010) and home sales, which continue to set records for prices and volume, indicate a robust economy. Developers are scrambling to meet housing demands.

Last May, Tyler ranked No. 59 for 2014 Best Cities for Job Growth by NewGeography.com -- a workforce analytics company.

Oil and gas prices have created a negative ripple effect in the economy but growth in other sectors has kept losses in check.

Tom Mullins, president and chief executive officer of the Tyler Economic Development Council, said several employers, from Wal-Mart to Centene, a company that processes Medicare and Medicaid claims for millions of customers nationwide, are expected to bring more than 1,000 new jobs to Tyler in the next three years.

Fresenius Medical Care North America, a multinational health care corporation, will bring 300 to 350 medical administration jobs that pay an average of $45,000 to $50,000 annual salary and benefits, Mullins said.

While jobs at Fresenius could allow families with combined incomes the option of exiting rentals, many of the other new jobs will pay just above minimum wage or limit workers to part-time hours, Mullins said.

"That creates a different dynamic where people could be spending one-third of their annual income on rent," he said.

Mullins said the housing and rental markets haven't hit a critical point yet when it comes to supply and demand. But the hotter the market gets because of employment opportunities in the Tyler area, the more likely people could be priced out of home purchases and monthly rental rates, he said.

AFFORDABLE RENTALS

Ed Thompson, a builder and owner of Pinnacle at North Chase on North Broadway Avenue as well as other rental properties, said developers always look for niches within the market. He has expanded affordable housing opportunities within his developments, which include units subsidized via the U.S. Department of Housing and Urban Development.

He said there is a great need in Tyler for affordable rentals for students and lower-income residents as well as senior housing units.

"Developers have to come up with innovative ways to provide people various housing options," he said. "It's important that young families be able to afford a nice apartment where they can establish themselves and either transition to buying a home or move to a different rental option."

Thompson said rental prices are an extension of the investment, such as land purchases, construction costs and overhead, which has to be covered with a return for investors.

Nix views apartment development and investor interest as a vote of confidence regarding local growth and long-term housing demands. Mullins noted several outside investment groups have inquired about purchasing rental properties with 100-plus units.

Mullins said concerns about rental availabilities and costs -- and how they relate to job growth and wages -- tie in with other Tyler growing pains, such as traffic, rising cost of living and school overcrowding.

"From my perspective, any problems related to growth I'll happily deal with," he said. "They're overall positives and lead to people's ability to upgrade their lifestyle, housing and wages."

Twitter: @newsboyAdam

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