The single-family rental market is booming and both baby boomers and millennials are pursuing single-family homes as a viable renting option.
Did you know that 37% percent of Americans live in rental properties? This is the largest amount of renters since 1965. Single-family rentals are the fastest growing segment of the U.S. Housing Market. Similarly, owner-occupied households are at an all-time low, according to U.S. Census Bureau data.
The single-family rental is a thriving sector of the housing market and with its increased demand comes a changing landscape. Read below to check out what factors are associated with the sudden single-family surge.
Economy Plays A Role
Experts say that the current state of the economy has been a big factor in the success of single-family home rentals. Student debt, stagnant wages, and the inability to save for a down payment has kept younger potential home buyers on the sidelines. Lack of housing inventory and stricter lending is also causing a lot of people to look into the single-family home rentals as the next best option.
Similarly, Baby Boomers are also advocating single-family rentals. They’re less interested in noisy and crowded multifamily properties and would rather enjoy the luxury of a home without the hefty down payment and maintenance costs.
The aging baby boomers are also taking advantage of the current rental market as they start to adopt a more nomadic lifestyle. They see renting as a more flexible option when it comes to traveling and visiting family and friends across the country.
Millennials Are Making The Shift From Multifamily To Single-family Homes
As older millennials start to settle down and have children, they’re outgrowing multifamily properties in search of more space and structure. They’re quickly turning to single-family homes because of they provide the tranquility and space they provide, but still offer the freedom and mobility that comes along with renting.
The younger generation is also much more transient, as they are likely to accept job offers in different cities or join friends and family in a new state.
People Are Renting By Choice
On the contrary, not everyone wants to become a home buyer. Harvard Universities Housing Studies report that 18% of renters earn more than $100,00 a year. This group has potential to become homeowners, in some markets, if they desired, but increased demand and the lack of housing inventory have made renting an easier choice for this demographic.
Similarly, many millennials saw their parents underwater with a large mortgage when the financial crisis hit in 2008 and are looking to rentals as a less intimidating option.
Increased Opportunity For Investors
According to the U.S. Census Bureau, 35% of renters rent a single-family home and single-family homes account for 39% of rental inventory on the market. This offers a big investment opportunity for investors and property managers alike.
As land prices and new construction costs are rapidly rising, single-family homes offer an excellent investment strategy for mom and pop landlords to seasoned investors.
As Urban Institute reports, of about 15 million single-family homes, only 200,000 of these are owned by institutional investors. If you compare that to multifamily where institutions own more than 55% of all properties, this offers much less competition and more opportunities for your average American investor.
Investors who can expand into smaller, low-cost markets may also see favorable results.