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January 2018   Volume 44, Number 1      
 

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Renting Is Overtaking the Housing Market

Single-family rentals — either detached homes or townhomes — are developing faster than any other portion of the housing market. These rentals have outpaced both single-family home purchases and apartment-style living, according to the Urban Institute.

“Almost all the housing demand in recent years has been filled by rental units,” says Sara Strochak, a research assistant with the Urban Institute. She also says that single-family rentals have increased by 30 percent within the last three years.

When did rentals become so popular and why are people becoming more inclined to rent rather than buy? Here is a quick overview of the rise in rentals and how it’s affecting the housing market.

When Did the Rise in Single-Family Rentals Begin?

The housing bubble collapse and the subsequent recession shattered the decades-old tenant of American wisdom that you can’t go wrong by purchasing a home. Most of the housing market fallout from the Great Recession has finally declined — foreclosures and underwater mortgages are back to traditional levels and home values have managed to recover in the majority of U.S. markets. However, one thing has not recovered: Americans’ unquestioned desire to purchase a home.

Today, single-family rental homes and townhomes make up 35 percent of the country’s 44 million rental units, as compared to 31 percent in 2006.

Who is Leading the Rental Trend?

Millennials are outpacing other groups in single-family rentals and many factors are contributing to this trend. Many young adults are in no hurry to commit to a specific location, whether they are traveling or simply aren’t ready to buy into a particular area or home. Student loans and stagnant incomes are also making it harder for them to save for a down payment.

Are Millennials the only Group Affected?

Young people are not the only ones renting. Americans over 55 have also become more interested in renting. According to RENTCafé, the number of renters aged over 55 has grown by an astonishing 28 percent between 2009 and 2015. Many of them want to rent homes instead of apartments. From 2010 to 2016, single-family rental households in the U.S. rose by nearly 2 million — 1.26 million of those renters were 34 to 65 years old, while just under 500,000 were 65 or older, according to a RENTCafé Census data analysis provided by Adrian Rosenberg.

When Did this Trend Become So Popular?

The home renting trend started when large firms began buying inexpensive homes during the recession and converting them into rentals, which were often rented by families who had lost their homes or who could not qualify for mortgages. Institutional investors purchased millions of single-family homes that had fallen into foreclosure.

Since home prices have mostly recovered, that business model no longer works and small-time landlords now dominate the market.

“I can buy lots in areas that I can’t sell homes, but I can rent,” real estate agent Adam Whitmire told ATTOM Data Solutions, a firm that analyzes housing market data, in a recent report. “The local economy may not have enough income or enough credit to buy but there is enough income to rent.”

The main attraction to renting is obvious: buyers don’t need to make a large down payment in order to move in. However, there will likely be “unintended consequences as the nature of some neighborhoods change,” warned Daren Blomquist, senior vice president at ATTOM. Renters might not be as invested in communities as owners.

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In this issue:

Renting Is Overtaking the Housing Market

Weekly Mortgage Applications Rise As Rates Pull Back

US New Home Sales Soar to Highest Level in 10 Years

Senate Version of Tax Bill Saves Mortgage Interest Deduction but Realtors Still Unhappy

Homebuilder Confidence Rises to 8-Month High

Foreclosure Crisis Lurks in Hurricane Damaged Areas

Fannie Mae Launches Program to Help Boost Homebuilding

Facebook Announces New Features for Home Sales

8 Markets Where Housing Inventory Is Actually Increasing

Three Facebook Updates That Affect the Way You Advertise Your Real Estate Business

 


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