Renter Demand Puts Pressure on Single-Family Rental Prices
The median monthly rent for single-family rental properties is rising faster than rents for apartment units, reported Zillow, Seattle.
While rent growth for both single-family rental houses and apartments has slowed over the past year, median rent for houses rose 1.3 percent annually to $1,404 per month while median rent for apartments rose only 0.5 percent to $1,551 monthly.
“When the market crashed, many families lost homes they owned during the foreclosure crisis, and now may not be able to afford to buy another as home prices rise,” said Zillow Chief Economist Svenja Gudell. “Those who want to buy are finding it difficult to find the right one or may need a bit more time to come up with a down payment but still want the advantage of space that single-family residences often provide. This–coupled with the foreclosure crisis turning millions of homeowners into renters–is a big reason why demand for single-family rental houses has risen over the last few years.”
Zillow said investors scooped up many single-family homes lost to foreclosure during the financial crisis and turned them into rental assets. Nearly 20 percent of all single-family houses across the U.S. were rented in 2016, up from 13.5 percent 10 years prior.
“Meanwhile, rentals are in increasingly high demand because many aspiring homeowners don’t have enough money to buy a home,” Zillow said. “A 20 percent down payment on a typical U.S. home costs more than two-thirds of the median household income, but can cost up to 180 percent of the median household income in pricier housing markets like San Jose and Los Angeles.”
The Zillow Consumer Housing Trends Report said 45 percent of all recent renters considered renting a single-family home, but just 28 percent actually ended up renting one. In addition, half of all buyers with children at home considered renting instead of buying during their home search. The Census Bureau said 40 percent of families with children still living at home are renters.
In Portland, Ore., SFR asset monthly rent is rising nearly 4.5 percent annually while apartment rents are falling, the report noted. Over the past year, median rent for Portland apartments fell more than 1 percent to $1,536. Median rent for Chicago apartments is also falling while Chicago-area SFR rents are rising more than 1 percent annually.
Generation X renters–age 38 to 52–are significantly more likely to rent a single-family house than any other home type, Zillow said. Just over 40 percent of Generation X renters choose to rent a single-family home compared to 25 percent of millennials (ages 18-37) and just 10 percent of Silent Generation renters aged 73 and over.
