21 Apr Midwest Housing Shortage Could Be an Opportunity for Self Storage
By Alex Hassel, Storage.com
The Midwest has become a seller’s market for real estate, according to a Bloomberg report released in early April. In fact, the region is suffering from major housing shortages, particularly in cities like Omaha, Neb., and Minneapolis, Minn., where population growth is rising due to the number of new job opportunities.
Buyers in these cities can make several offers on houses within a week and end up with nothing, but sellers can see offers and even close sales within hours or days of listing their homes in their respective markets.
Tasha Moss, Residential Sales Agent with Berkshire Hathaway HomeServices in Omaha, says there’s been low home supply in the market for around two years.
“When the market went down, building here came to a halt,” she says. “We’re just now starting to catch up to the lack of building during those down years. However, we’re seeing record new construction now. That’s booming. I’m not seeing this slowing down any time soon, although some people think it will happen next year, but it’s hard to say because we’re two years behind the market.”
Moss continues, “A lot of people are trying to buy right now because there’s talk of interest rates going up. We don’t know when they’ll change. A lot of people want to get in with the current low rate, but I don’t think it’ll go down any time soon with it being an election year. That’s the fear, though.”
Once a home is up for sale in Omaha, Moss says it’s not uncommon for offers to start rolling in within a couple of hours. A home at the $250,000 price point rarely lasts longer than 48 hours on the market.
The housing sector is similar in Minneapolis. Michael Sharp, a real estate agent with RE/MAX Results, focuses on the Downtown Minneapolis area and says there’s a major lack of inventory. Demand between baby boomers and millennials puts pressure on pricing for existing townhomes and condos. He adds that, between low interest rates and prices Minneapolis hasn’t seen since the height of the market in 2005, everything goes in just days. However, what may be a larger issue is the lack of growth.
“Right now, we have a statute that says developers must supply a warranty for issues like major structural defects for ten years,” says Sharp. “This has scared everyone away from new construction, and nothing is being built. Contractors are building apartments but inserting clauses that the buildings can’t be sold for 12 years in order to avoid the warranty.”
Sharp has watched the market numbers dwindle in Minneapolis. In 2007, there were 700 condos available downtown. By 2012, that number dropped to 200. In the middle of 2013, there were only 150. Right now, he says, just over 100 condos are on the market. As a result, homes are also going fast in Minneapolis.
Sharp says anything under $300,000 in the downtown area goes quickly. “I sold one in one day,” he says. “The buyers said they would take it and didn’t even negotiate a price.”
In both Omaha and Minneapolis, homes are often being sold so fast that the sellers are far from ready to move.
“The sellers’ biggest concern is where they’re going to go,” Sharp says. “It’s a catch-22. They need to make it happen while the highest buyers are still interested, but they may not have a new place to move into yet.”
“It’s all about agent education,” adds Moss. “Before we list a home, I’ll tell you that I think you need to get out of your house. I tell you to find a hotel room or stay with relatives. Then, when there’s 18 showings in 24 hours and four offers right away, people call me and tell me I was right. They have to know going in that there’s a good chance it will sell if it’s priced right. It’s a lot easier just to get out, so start thinking about what you have to do to move. If you don’t already have a new home to move into, self storage might be a good idea.”
Self storage, in most cases, seems to be the answer for Midwest homeowners who sell their properties and have to move quickly. Kelly Kuehl, a property manager at 90th & Maple Self Storage in Omaha, says she can’t pinpoint an exact increase in movers over the last couple of years because, like most storage facilities in the industry, 90th & Maple Self Storage has seen high occupancy rates (i.e., 95-98% capacity) over the last couple of years.
“We get a lot of movers,” Kuehl says. “Real estate agents tell them once they begin staging to get their belongings in storage right away. I have some people that might only be a month, while others might be three months. [Or] some people start with a large unit but stay longer with a smaller one.”
Stephanie [redacted], a manager at St. Anthony Self Storage in Minneapolis, says movers in the facility’s area are also taking advantage of self storage. While the St. Anthony Self Storage is at nearly 90% capacity, she says roughly 40% of that number is people who are moving. “We stay pretty full,” she says. “Everyone says they need it for a month, but it usually turns into three to four months or six months.”
While there doesn’t seem to be any end in sight for the low supply of homes in the Midwest, this is a great opportunity for self storage businesses with occupancy to market themselves as a solution for frantic movers. Having a cheap and safe place to keep belongings is a great stress reliever for movers during their transition.