More Renters, Higher Rents Predicted in Next 15 Years

Rental-Surge-

It looks like 2000 might be the peak for home ownership in our lifetimes.  In 2000, 66.3% of Americans owned their own home.  Its done nothing but drop since then, with no change in sight.

The Urban Institute predicts that the ownership levels in 2030will be at about 61%.  Each 1 percent drop represents 1 million people who are renting instead of owning.

“A rental surge is coming,” according to “Headship and Home Ownership: What Does the Future Hold?” a report from the Urban Institute.

“Over the next 15 years, new renters will outnumber new homeowners—causing a sustained surge of rental housing demand that will significantly affect Millennials, seniors and minorities, and expose important gaps in our current housing policies.”

What is driving this?  Read 20 articles and get 20 opinions is what we see.  The Urban Institute says an increase in minorities, who are more likely to rent, is the primary driver.  We think the truth is probably more complex than that.

But the reality is the reality.  It seems very likely that the shift is going to happen.

So what does this mean?  Here are some implications:

 

1.  Rents are going to keep going up.  “We think 2015 rent growth should come in at the high 4 percent range, versus an earlier expectation of around 4 percent,” says Greg Willett, vice president for MPF Research, a division of RealPage Inc. “For 2016, our expectation is now in the high 3 percent range, an upgrade of about 50 basis points.”

2.  Multi-family new construction is going to have to keep growing.  Right now in fact, construction of new units is outpacing demand, which could logically lead to a softening of rents at some point.  But longer term, this inventory appears to be destined to be gobbled up.

3.  Its a good decade to own a single family rental.  For many people, renting an apartment is not first choice.  Larger families in particular will want to rent homes, not apartments.  This should lead to more demand and push both rents and appreciation up for single family investment property.  The buy and hold investment strategy will never have made more sense than in the next 15 years.

Urban Institute Predicts Rental Surge Among Millennials, Minorities, Seniors | National Real Estate Investor

Dylan

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Dylan