Wednesday, February 24, 2016

Why Are More Americans Renting Homes?

Over the last 10 years, the rental market has boomed. It seems like the old American dream of home ownership has lost its glamour for people across many age groups and incomes. Of course, people with lower incomes have made up the largest part of growth, but even people with incomes over $100,000 are choosing to rent in greater numbers than they used to. 

Who Does the Rental Boom Help? 

The increase in rentals and decline in homeownership has been great news for property owners, of course. All across the country, rental costs are spiking every year. At the same time, the largest property markets have almost all enjoyed average occupancy rates over 95%, a rate that is usually considered full occupancy.

A few different factors are probably contributing to the increase in renting:

  • Baby boomers: As this generates ages, they are choosing to rent in order to downsize and enjoy more access to services.  Of course, boomers downsize homes to save money too.
  • Millennial generation: This generation is finding that wages aren't that high, and it is harder to qualify for a mortgage than it used to be. 
  • Attitudes: After the Great Recession, people may not feel as if real estate is the reliable investment that it used to be thought of. 
  • Mortgages: Another result of the housing bust was much tougher mortgage rules. 
Of course, this trend has increased rental rates so much in some areas that it has impacted affordability. Even though rates have been increasing each year, this issue might begin to cap increases within the next few years. Property investors really need to understand the market and buy or build rental properties that are likely to be priced so that a good population of local people can actually afford them. 

Many investors have been building high-end rentals to serve a high-income market. However, this is not as much of a sure thing as investing in more modest properties that people with lower incomes can afford.

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