|January 2018 Volume 44, Number 1|
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 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.
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.