It’s been years since the “Great Recession” ended, and the housing market is still picking up the pieces that were scattered throughout the nation. Foreclosed properties, stalled construction projects and low homebuyer confidence have shifted the mindset of homeownership.
Four out of 10 renters are under the age of 35; however, more than a third are middle-aged (between 25 and 54). So although the millennial generation has a definite stronghold on the rental market, Americans of all ages are playing a role in the growth of the home rental sector.
According to the National Multifamily Housing Council, 35 percent of renters live in a single-family home, trailing just behind the amount of people living in multifamily unit buildings of five or more units. With home prices having fully recovered in many areas of the nation, the investor activity in single-family homes has shifted in 2015.
According to data from RealtyTrac Inc., institutional investor activity has subsided slightly while the small and midsized investment groups are still very active. Property owners of single-family homes are increasingly becoming aware of the benefits of long-term leases rather than higher turnaround, which was previously a popular decision due to the ability to annually increase rents.
This shift has also given new life to the entire idea of rental homes in neighborhoods, which has been a hot topic among homeowners who reside in areas that have a density of temporary homes. Many argued that rental properties would bring down local home values, increase crime rates and have a negative impact on a neighborhood’s sense of community.
Millennial impact on the single-family home rental
The blame for the slowing of the housing market has been put on the shoulders of millennials in various occasions. Cited for “holding back the real estate market recovery,” the group of individuals has taken the reins as one that may be helping to propel the single-family home rental market into a new light.
With apartment rents rising and millennials still showing interest in more temporary housing, single-family rental homes have become a more suitable solution for many Americans not yet confident in purchasing a home.
According to John Burns Real Estate Consulting, 11.3 percent, or 1 in every 9 homes, are single-family rental properties. The number of single-family rental properties has increased significantly since the prerecession 2006 inventory of 11.2 million, specifically by 35 percent to 15.1 million. The amount of full home rental properties has even surpassed the inventory level of apartment rentals by 1 million since 2006, with 3.9 million and 2.9 million single-family home rentals and apartment rentals, respectively, coming new to the market.
One prediction is that as many millennials are still struggling with student loan debt, the prospect of purchasing a home is a daunting one. Instead, they are moving into larger spaces like single-family rental homes to have more space, perhaps a yard, without the financial burden of actually owning a home. This trend is a win-win for renters who still want the lifestyle of a quaint neighborhood.
At the Third Annual Single Family Rental Investment Forum (East): Homeownership Trends & Demographic Changes that Impact the Single Family Rental Market, experts estimated a five- to seven-year delay in following the same path that individuals in the generation before them (millennials) did, such as getting married, having kids and buying a home.
In the next eight years, the presence of baby boomers in the rental market is expected to increase to make up roughly half of all renter growth by 2023. By this time, millennials may have moved into the buyers’ shoes, although the mentality of shareability and no-strings-attached will likely continue to have an impact on the growth of the single-family rental market.