After lull, more are buying homes - Omaha.com
Published Sunday, November 25, 2012 at 1:00 am / Updated at 12:57 pm
After lull, more are buying homes

Since college, Jessica Guerrero and her future husband, Derrick, dutifully paid their monthly rents. At first, neither wanted the responsibility of owning a home. Then plunging property values and a shaky economy fueled their skepticism.

But interest rates kept dropping; their respective rents kept rising. And just before moving into a $1,300-a-month luxury apartment together, the couple had a change of heart.

“We are so happy now,” said Jessica, newly wed and newly settled into the pair's first house. “We'd never go back.”

The Guerreros — she's 26 and he's 27 — reflect what Omaha area real estate agents and others see as the start of a local shift back toward homeownership after a three-year economic and housing lull that benefited the apartment market and pushed up rents.

While occupancy rates at apartment complexes remain strong, the pace at which they are filling has slowed in the past few months, according to MPF Research, a division of RealPage Inc. that tracks housing trends. Experts say the movement to owning is driven by factors including stabilizing home prices, improved job stability and rising rent that, on average, has increased locally nearly 3 percent since last year.

“The Omaha economy has been doing very well, and that clearly is driving more and more people to go out and buy homes,” said Jay Parsons, MPF's national market analysis manager. During the past three years, he said, people continued to marry and have kids and many now are looking to have their own backyards.

The Omaha Area Board of Realtors says the number of homes signed under contract last month jumped 8 percent from the previous month. Pending residential sales leaped 25 percent this October over last October. And so far this year, 17 percent more home transactions closed than during the same 10-month span last year.

Also trending up are building permits for newly constructed homes. The number granted in Douglas and Sarpy Counties in August and September was up 11 percent compared with the same time frame a year ago.

It's not that restrictions on home loans have loosened. Rather, said Kelly Hillman, manager of mortgage sales at Mutual of Omaha Bank, consumer confidence and fear that interest rates won't stay low much longer are motivating that younger crowd — people who might have been doubling up in apartments or living with parents.

Hillman said his bank is on track to grant up to 20 percent more loans this year for home purchases than last year.

Stewart Larsen, head of the Bank of the West's mortgage division, said he also has witnessed more home sales activity — five new houses just went up in his west Omaha neighborhood. But he cautions that a chunk of existing home sales are attributable to aggressive investors snatching up single-family houses to lease.

Despite the third-quarter apartment slowdown, the area's multifamily market overall remains as healthy as it has been in a decade, said Bob Dean of Seldin Co., who has managed multifamily properties for about 20 years.

Omaha area apartment complexes, according to MPF, are 95.6 percent full, down slightly from 96.4 percent the second quarter of 2012, but up from 93.9 percent at the start of 2011.

Nationally, occupancy rates are at 95.4 percent, compared with 93.8 percent at the start of last year.

Victor Calanog of Reis, which also tracks apartment trends, said the third quarter typically is strong but delivered the slowest rate of improvement nationally since the recovery began in early 2010.

He said the slowdown in occupancy improvement was not the result of too much apartment construction, adding that demand nationally still outstrips supply growth. But with demand potentially flagging and supply growth rapidly increasing across the country, Calanog said Reis expects national vacancy rates to improve only marginally over the next couple of years.

“Landlord revenues still will be healthy,” he said, adding that rent growth should be around 3 percent over the next few years.

Ed Fleming of Colliers International, whose clients include Omaha-area apartment owners and buyers, said he still sees robust apartment construction and sales activity driven by investor demand and attractive financing rates. And he thinks the recent slowdown is merely a blip and not a long-term trend.

Building permits were issued for about 900 Omaha-area units in the first nine months of 2012, a 35 percent increase over the same time period last year. Fleming predicts the year could end with 1,100 new apartments, a tally he called a heathy inventory in line with Omaha's underlying population growth.

He doesn't expect the uptick in home sales to significantly weaken the apartment occupancy. That's in part because the housing collapse brought forth “a new generation of likely perpetual renters who don't see the same value in owning a home that the prior generation saw.”

Demand for apartments has been strong enough to allow many landlords to eliminate lures such as an extra month of rent or a free big-screen TV. Dean said rents have edged up more aggressively this past year than they have in eight to 10 years.

Still, apartment living sounded better than the alternatives to Vijay Devaruppala.

Devaruppala moved from Memphis this past summer with his wife and two kids to the Montclair Village Apartment Homes. They weren't familiar enough with the city's neighborhoods to buy property, nor was he in a rush to pay property taxes.

“The mortgage rates are low, but your property taxes are going to kill you,” said Devaruppala. “That's a critical factor here.”

An apartment also was the choice for neighbors Jeff and Pam Daley, who wanted to downsize after raising three kids in their Millard home. They like the swimming pool, 24-hour workout facility, dog park and a view overlooking a golf course.

Mostly, their focus was on Jeff's new business, Ragazzi's Pizza, and the couple wanted to take more time before deciding on a more permanent place.

For “obvious financial reasons,” the Daleys eventually plan to buy a property to live in, he said. But they're also considering keeping a rental apartment and buying a vacation home.

Mike Homa, president of Mutual of Omaha's Nebraska operations, doesn't see the current level of apartment construction lasting too far beyond 2013.

Crossing Homa's desk of late are financing proposals for apartments that project annual rent increases of about 3 percent to 4 percent. Homa expects those price increases and record-low interest rates to push more apartment dwellers to houses, provided they can pass credit restrictions.

Carolyn Laible, 30, already is looking. A secretary, Laible lives in a 500-square-foot midtown unit that costs $495 to rent, excluding utilities.

“You always have to worry about your rent going up,” she said. “I'm tired of making somebody else rich. I want the freedom to paint, do what I want without having to ask the landlord.”

In the Guerreros' case, Jessica was fed up with paying rent. Derrick said he recognized that landlords also face cost-of-living increases. “My biggest problem was that it was money going nowhere,” he said. “Basically we were throwing it away.”

It didn't really sink in, he said, until the couple stumbled on a cute house for sale and saw a flier out front with payment information they figured was within their reach.

The house that had been in their 10-year plan became a priority. They looked at 60 or so homes, with the help of Alliance Real Estate's Chris Mangen, before landing their 1,600-square-foot northwest Omaha residence with a huge yard and covered patio for $135,000.

The newlyweds hit some rough spots along the way: scrimping for a down payment, a plumbing scare. They're also getting used to remembering trash day and doing their own yardwork.

“But it's so worth it,” Jessica said.

Contact the writer: 402-444-1224, cindy.gonzalez@owh.com

Contact the writer: Cindy Gonzalez

cindy.gonzalez@owh.com    |   402-444-1224    |  

Cindy covers residential and commercial real estate, economic development, tourism and hotels, and immigration issues related to businesses.

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