Single-family rentals that are either detached or townhomes are developing faster than any other segment of the housing market, according to the Urban Institute. They are currently outpacing single-family home purchases and apartment living.
Within the last three years, single-family rentals have surged 30 percent. Single-family rental homes and townhomes comprise 35 percent of the nation’s 44 million rental units. That percentage is up from 31 percent in 2006.
Millennials are largely fueling this trend, but Americans over 55 years old are also showing a growing interest in renting. The number of renters aged over 55 has increased by 28 percent between 2009 and 2015, and many are showing a desire to rent homes instead of apartments.
During the recession, investors flocked to the market, buying up cheap homes and turning them into cash-flow rentals. These homes were often rented to families who had lost their homes to foreclosure or who could no longer qualify for a mortgage. Since prices have recovered, investors are no longer snatching up homes by the thousands. Small-time landlords are now dominating the single-family rental market. Investors who own only one single-family rental unit comprise 45 percent of the market share.
To add even more inventory, some builders are constructing single-family homes intended to rent than sell, according to ATTOM Data Solutions.
“I can buy lots in areas that I can’t sell homes, but I can rent,” real estate practitioner Adam Whitmire told ATTOM in a recent report. “The local economy may not have enough income or enough credit to buy, but there is enough income to rent.”
The movement toward more single-family rentals can be either good or bad for a neighborhood. The professionalization of the single-family rental industry can help standardize levels of maintenance and management services, says Daren Blomquist, senior vice president at ATTOM. On the other hand, there will likely be “unintended consequences as the nature of some neighborhoods change,” Blomquist warns. Renters, for example, may not be as invested in communities as homeowners.
“For example, people who want to own a home may no longer be as active in the typical suburban white picket fence neighborhood as properties in those neighborhoods become more prominently rentals,” he says. “That may push those homebuyers back into more urban, walkable environments, or it might push them further out to more rural areas.”
Source: “Renting Is Overtaking the Housing Market—Here’s Why,” Credit.com (Nov. 8, 2017)
