Posted by: union03g | January 27, 2010

2016: Best Year To Be a Landlord, EVER.

It’s my belief that 2016 will prove to be the best year to be a residential landlord in the history of Chicago. Why you ask? Well lets look out over the next 20 years at what’s going to happen in this city. We know that housing starts including large condo buildings, spec new construction and multi-unit complexes are all but non-existent as supply is aggressively contracting. Chicago has a few more condo buildings to be completed and then completion numbers will drop virtually to zero. Assuming there won’t be another large condo project that gets financing until 2011-2012 and safely assuming it will take ~4 years to complete a new condo building from architectural designs to financing to pouring concrete to delivery, that puts us out to 2016-2017 to see the next substantial condo project getting completed. So, during the next 6 years there will be little new housing stock and existing housing will be fully absorbed.

Just like the over-development cycle lagged real world economics by many years, so too will the cycle of non-development. Chicago in 2016 will see a complete reversal in the market place from Renters/Buyers having all the power, to buyers/developers having all the pricing power. It will be a supply driven environment.

The chart below shows monthly housing completions going back to the late 60’s. Notice the normal peak to trough cycles and notice how over-corrected and dry the pipeline of new housing stock is getting. And it’s going to continue to over-correct for another 1-2 years which will leave Chicago landlords in position to make a lot of money in 2016.

Typically, everyone is concerned about oversupply because its tangible and easy to see and understand, but no one is talking about the inevitable future. In 2016 people will count Real-Estate as one of the best investments going because homes will appreciate steadily for many years.

Time to accumulate investors!

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Responses

  1. […] 2016 will be a tremendous year to be a landlord in Chicago. […]

  2. […] This is a good sign for CRE considering everyone believes it’s the next bubble to burst. My thought is: how can CRE really be that bad if architectural business is seeing an increase in activity and a recovery. The ABI might even be above 50 by the end of summer! Can you imagine how hard activity will snap back due to the depleted pipeline??? […]


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