By Erin Ruane, Executive Director, Homes.com Rentals
America’s recent recession brought about many changes to the housing market, with one major impact being an increase of single-family rental housing units. Freddie Mac reports that the single-family rental market, not to be confused with multifamily, has expanded 16 percent (about 3 million units) since 2007 to total around 11 million single-family homes across the country now occupied by renters.
Factors contributing to the rise of those looking to rent a home rather than buy include uncertainty with jobs, negative equity and a large amount of foreclosures. Certain demographic trends, particularly with younger renters, are also driving this increase, such as a desire for amenities, flexibility and a desire to live in more urban environments.
A survey of renters conducted by Opinion Research Corporation showed that single-family rental homes are the fastest growing housing option in America, with 3.6 million homes built for owner occupancy now serving as rentals because owners lost them through foreclosure.
Based on MBA’s National Delinquency Survey, the foreclosure rate has skyrocketed from around 1 percent in late 2005 to around 4.3 percent today. With more than a million homes still in the national foreclosure inventory, that number is expected to rise as many of those will be converted to rentals in the ensuing years.
This trend is expected to continue, with five to six million new renter households being created within the next 10 years, likely caused from low inventories of homes available and tight credit conditions, according to the Bipartisan Policy Center. Many investors jumped into the market and snapped up single-family houses with the goal of renting them out to make bigger returns in key markets.
Not surprisingly, Homes.com has seen 34 percent of its traffic searching for rentals (single-family homes), and this number seems to be rising monthly.
According to data from the 2012 U.S. Census and analyzed by the National Multifamily Housing Council, 32 percent of U.S. households are renter-occupied, with 33 percent of renters living in single-family homes.
The National Association of REALTORS® expects a strong demand for apartments to drive up rents 4.6 percent this year, leading many people to explore the possibility of renting a home.
Because of student loans, a tough job market and stricter mortgage requirements, millennials lead the pack of renters, with 43 percent of all renters falling under the age of 30. Gen Y are not the only renters, however, as 37 percent fall into the 30-44 year old bracket, with 22 percent between 45-64 and 16 percent over 65.
A real estate professional would obviously prefer to sell a home or find a home for their client to buy, rather than going the rental route. A savvy agent will think more about the immediate financial gains, but there are long term gains to be had as well.
Those renting may wind up eventually buying the home or will save up enough money to purchase another home, and will call on your relationship with them for guidance. Keeping your clients happy is the main goal.
In an analysis by Premier Property Management Group, out of Memphis, Tenn., it’s revealed that single-family home tenants are 25 percent more likely to remain in their current homes five years or longer, compared to just 22 percent of apartment dwellers, so it seems more stable than multifamily rentals.
Studies show that half of all renters, including approximately 60 percent of single‐family renters, anticipate becoming homeowners in the next five years. Of those, families with three or more members clock in at around 64 percent, and those with children under 13 register about 69 percent.
While the housing market is turning around in the early months of 2014, economic uncertainty and new regulations on mortgages should keep the rental market going strong in the months ahead. With more rental housing choices available today, property managers are more challenged than ever to make sure their vacancies attract tenants and rent quickly. Visit Homes.com for marketing solutions and resources to support property managers looking to fill their existing vacancies and add properties to their portfolios.
For more information, visit www.connect.homes.com.