Renting is the Answer for Consumers Wary of Buying Homes
After some considerable sizzle last year, the U.S. housing market rebound has slowed as sales and price increases experience an end-of-the-summer lethargy.
Despite an improving national economy with some significant employment gains, consumers remain worried about job security, stagnant wages, tight credit and high debt levels. These worries are driving more consumers to consider rental housing.
To be sure, housing experts don’t believe the housing rebound is over.
The current pullback, however, could be viewed as silver lining for those investing in the single-family rental market as indicators suggest this sector is continuing to gain favor among consumers who are hesitant to buy.
Fannie Mae reports that Americans’ attitudes toward housing softened in August in a survey released by the government-sponsored enterprise last week. Interest in renting increased even though survey respondents indicated they expected rental rates to rise. “[T]he share of consumers who said now is a good time to buy a home dipped for the second consecutive month, falling six percentage points since June to 64 percent — tying the all-time survey low,” Fannie Mae reported.
In July, the U.S. Census Bureau reported the nation’s homeownership rate had dropped to the lowest level in about 19 years — 64.7 percent in the second quarter, down from 64.8 percent in the previous three months. The implication for investors of single-family rentals is clear: Demand remains strong in the rental sector.
Rental housing has “always provided a broad choice of homes for people at all phases of life,” notes Harvard University’s Joint Center for Housing Studies in a 2013 report on the sector, “America’s Rental Housing”.
“The recent economic turmoil underscored the many advantages of renting and raised the barriers to homeownership, sparking a surge in demand that has buoyed rental markets across the country,” the report said.
While the Great Recession — with its high unemployment and its wave of foreclosures — drove many into rental housing who might have otherwise preferred to own their homes, more recent trends are raising the popularity of renting even among those who can afford to buy.
“All in all, recent conditions have brought renewed appreciation for the benefits of renting, including the greater ease of moving, the ability to choose housing that better fits the family budget, and the freedom from responsibility for home maintenance,” the Harvard report said.
FUTURE GROWTH OF RENTAL HOUSEHOLDS
JCHS estimated renter household growth over the next decade by applying current homeownership rates to recent household projections.
Depending on the pace of immigration, the center estimates that the number of rental households is likely to increase by between 4 million and 4.7 million between 2013 and 2023. Although this indicates a considerable slowdown from the current rate, rental growth would still outstrip increases experienced in the 1960s and the 1990s.
The information on this page is provided for informational purposes only and does not constitute investment, real estate, or legal advice. This information should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. No representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. The information may be modified or rendered incorrect by changes in the marketplace or developments in the law, or for any other reason, and may not be applicable to any individual reader’s facts and circumstances.