Within the next 10 years, 5 to 6 million new renter households will be created, according to data from the National Association of Realtors.
Since housing crashed in 2008, renting households have jumped to a surprising 38 million, a number that is expected to continue rising to 41 million in the next two years, according to the U.S. Census Bureau.
In fact, only half of renters say they plan to own a home within the next five years. So what is behind this recent push in renting and why are experts confident it’s here to stay?
Companies such as Real Property Management doubled in size over the past two years, now totaling more than 230 offices in 47 states and managing assets worth more than $5 billion. At an average of eight new franchise per month, the company anticipates 60-80 new offices in 2013 and more than 100 offices annually moving forward.
"Profound changes in the housing market have created significant demand for property management companies like ours," said Kirk McGary, CEO of Real Property Management. "Our franchise continues to grow along with the number of renters, and it doesn't look like that's changing anytime soon."
According to also-booming business RentRange CEO Wally Charnoff, location is a strong determining factor for renters. In fact, among single-family property renters, 97% said a safe neighborhood is important when renting, while 84% said good schools are crucial. With for-sale inventory skin and bones, many families who would buy decide to rent instead to ensure they can live in a specific location.
Denver-based RentRange is a company that delivers an assortment of rental data, analytics and valuation solutions for single- and multi-family properties.
Charnoff added that rentals are a very localized entity and it’s tough to offer a blanket outlook, even by region. There are a lot of areas that are saturated with distressed properties where we’re seeing rentals come onto the market, he said. However, there are also other areas with distressed properties that come up against rules and regulations that have not led to the same uptick in rentals. "It really depends on the area," he said.
"In general, across the country there are more renters now than there were two or three years ago for sure," he noted.
Additionally, Charnoff believes renters have been set up perfectly to find a great rental property in their location of choice. "Institutional investors have provided a lot of readily available property," said Charnoff. With investor activity flourishing, homes are being purchased and rented out quickly. Charnoff described the for-rent inventory today as a "good stable inventory for families."
But, with mortgage rates rising quicker than most predicted, will this affect the inventory flow that renters are currently seeing?
Charnoff said yes and no. He noted that institutional investors aren’t so worried about mortgage rates, especially since they often make cash offers. According to Charnoff, 10% of the single-family housing stock has been single-family rentals for the past 10-15 years, way before institutional investors were interested in buying properties.
However, he added, "rising interest rates will affect the amount of available inventory," due to on-the-fence homebuyers feeling the pressure to buy before affordability gets any lower.