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Opinion, commentary and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.

Small housing inventory may push rental demand for years

December 31, 2012

The next 10 years may bring five to six million new renter households. Or at least that’s what a recent infographic by the Bipartisan Policy Center is saying. So in the midst of a recovering housing market, why the shift toward a rise in rentals?

Although housing starts are up, construction will take some time to complete and the low inventory of houses may push many potential homeowners to consider renting.

“There is clearly an unmet demand for homeownership among young households,” Barry Zigas, director of Housing Policy for Consumer Federation of America, told HousingWire. “Those households are running up against a number of constraints.”

Factors such as tighter credit, larger down payments and decreased income with the rising generation will all play into the increase in renters in the years ahead.

“Credit for homeownership borrowing will likely be tighter and potentially more expensive, relative to earlier times,” Zigas said. “Families will likely have less wealth because the rising generation is starting with less wealth. If down payments are at any significant level, it will be a barrier to acquiring a home for longer than may have been the case in the past.”

There are several key groups that will be the driving force behind the rental demand, according to the below infographic. The growing number of seniors looking to downsize their homes, the young adults moving out on their own yet not ready for homeownership, the post-foreclosure homeowners and the growing number of immigrants in the U.S. will all play a significant role in the rising rental remand.

“We expect to see an increase in household formation and for a variety of reasons that household formation is likely to be more heavily concentrated among renters and households who are likely to be renters for somewhat longer than was the case for the last 20 years,” Zigas said.

Click on the image below to see the full infographic.

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