MBA Chart of the Week: Diverted Homeowners, the Rental Crisis & Foregone Household Formation
The Research Institute for Housing America, MBA’s think tank, recently released a new study, Diverted Homeowners, the Rental Crisis and Foregone Household Formation by Myers, Painter, Lee and Park.
The study (https://www.mba.org/news-research-and-resources/forecasts-data-and-reports/research-institute-for-housing-america) reports the following key findings:
–Slightly more than five million otherwise-expected renters left or never entered the housing market, their growth displaced by households diverted from homeownership and diminishing overall household growth far below expectations. A further consequence of the resulting increase in demand and shortfall in supply in the rental market was an increase in rents, with rental affordability problems surging to record heights in 2010 and 2012.
–A sharp downturn in homeowner growth since 2006 suggests that 6.0 million would-be homeowners (the expected number compared to actual) have been shifted to renting or have left the housing market.
–These diverted homeowners triggered a cascade of adjustments throughout the rental housing sector that are measurable in different ways. A sizable portion (roughly one-third) of the diverted homeowners likely have been absorbed into single-family rentals, especially among households aged 25 to 54.
–Although larger than expected, growth in the rental sector was too small to account for both the expected rental growth and also the large number of diverted homeowners. Before disruptions to the owner-occupied market, the rental sector had been expected to grow by 4.4 million occupied units after 2006, due to the arrival of the large Millennial generation. While diverted homeowners resulted in demand for nearly 6 million additional rental units, rental housing only grew by 5.2 million.
–New construction was crippled during the financial crisis and aftermath, slowing its response to the swelling rental demand, although multifamily construction volume nearly doubled in 2012 compared to 2010 and increased another third in 2014 compared to 2012.
To view the Chart of the Week, click https://www.mba.org/news-research-and-resources/forecasts-data-and-reports/forecasts-and-commentary/chart-of-the-week.
(Lynn Fisher is vice president of research and economics with the Mortgage Bankers Association; she can be reached at lfisher@mba.org. Joel Kan associate vice president of economic forecasting with MBA; he can be reached at jkan@mba.org.)
