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Home Rentership: New Demographics in Housing

Heroic Investing logo and photoAlthough mortgage interest remains at a record low and low cost homes remain on the market, a major shift is taking place in the US housing profile: more people are choosing to rent rather than buy dwellings. With rental occupancy rates soaring and rents rising in response throughout the country, real estate professionals and economists debate whether factors such as a shaky financial climate and changing demographics signal a fundamental change in how and where Americans choose to live.

Some financial experts point out that it can be up to 45% cheaper to own a home than to rent an equivalent dwelling. But even though low interest rates and the continued availability of foreclosures and other good buys appear to make homeownership appealing, the aftermath of the housing meltdown of 2008 makes it difficult, if not downright impossible, for many people to complete a home purchase.

That group — former homeowners who lost their houses to foreclosure — make up a significant percentage of one new type of semi-permanent renter: those who would like to own a home but can’t manage to do so for financial reasons. With a mortgage default and other credit problems these former homebuyers are unlikely to be able to qualify for a new mortgage or manage a down payment. Joining their ranks are others with similar problems who’ve never owned a home before: either new or established households with unstable employment histories and other issues.

But another, growing segment of the rental population involves those who simply don’t want to own a home and prefer renting in a variety of settings: apartments, condos and townhouses as well as single-family homes. These renters include people who could buy a home but prefer the freedom of renting: “empty nesters” tired of maintaining a home, professionals who travel frequently, young unmarried renters with unstable employment. This kind of renter may plan to buy a home “someday,” but they don’t feel the need to make homeownership a part of their scenario for success.

Economists suggest that this shift in thinking about homeownership and its place in the oft quoted “American dream” could create a housing profile similar to that of a number of countries, particularly in Europe, where permanent renters make up a majority of the population, especially in cities. Such a shift could have a significant impact not just on the housing market, but also on the economy as a whole.

For investors in income property, though, the changing demographics of the rental market hold great promise, creating a pool of renters that’s likely to remain fairly constant regardless of improvements in the home buying market. And, since many of the new renters have made renting a permanent part of their lifestyle, rather than a temporary solution while saving up to buy a house in the traditional way, these potential tenants are financially able to pay the rents required to maintain the standard of living they want.

Real estate professionals maintain that in some ways there’s never been a better time to buy a home. For heroic investors following Jason Hartman’s investing strategies, that’s true – because for many others, there’s never been a better time to rent. (Top image: Flickr/juliecrockett)

 

The Heroic Investing Team

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