08 Nov The Coming Rental Housing Wave
In Costar, Mark Heshmeyer writes that “Protracted economic distress in the housing sector has created legions of renters in new markets and new age groups. ” In his article he quotes Freddie Mac SVP David Brickman as saying, “(It) is projected that $1 trillion in capital and 10 million in additional housing units are needed in the next 10 years” (Read full article).
The market growth is influenced by changes in demographics and consumer attitudes toward renting. The move from owning to renting reflects financially stressed households (who may face short sales or foreclosure of homes they had owned) and an increase in young and newly formed households who have decided to postpone home ownership in favor of renting during unsettled economic times. In fact, the decline in the home ownership rate has been sharpest for those household heads under 30 years of age.
Consider these facts:
Renters make up more than 40 million households – about one third of U.S. households.
For every one percent that the current home ownership level of 66 percent decreases, one million individuals become renters.
The demographics show a significant increase in immigrants, 20-34 year olds, and baby boomers entering the rental market.
In the last 12 months ending mid-year 2011, 1.4 million households moved into rental housing, while rents and occupancy rates have steadily increased due to the limited supply of apartments. There has also been virtually no new apartment construction in the last two years, which means demand will outpace supply in the next few years. In addition, many older buildings are in need of renovation. In fact, the median age of apartment buildings nationwide is almost 40 years. The good news is that new construction projects are underway in some metropolitan markets, with plans for more. I recently read an article about how “the most migratory of birds, the construction crane” has returned to Philadelphia. However, construction activity is still a fraction of what it needs to be, and what it was for much of the 1990s and 2000s.
To view the online blog, please click here. http://freddiemac.mwnewsroom.com/