October 20th, 2017 12:44 PM by Mike Frangadakis
There has been a massive trend towards renting. The vast majority of household growth since
the housing bubble imploded has been with rental households. I know this is hard to believe for Taco
Tuesday baby boomers but this is simply the new reality. And all of those investors that bought up
single family homes for rentals are living it up. There are now a few major changes impacting
the housing market – many more single family homes are rentals and many more
renters are staying put. In other words,
many are not looking to buy and builders realize this. There is now a large category of permanent
renters since many people live and work in more expensive metro markets. Short of forking out an insane amount of
money to live in say San Francisco, people are opting to rent. The proof is in the numbers.
More renters are not moving
Many households used renting as a bridge before venturing
out and buying a home. But more people
are renting and staying put:
Across all age groups, people are staying put longer in
their rentals. And this is being pushed
by investors renting out single family homes:
Look at the chart above.
This is an anomaly in terms of how many single family homes are out in
the market as rentals. In terms of how
many SFRs are rented as a percentage of the entire SFR pool, this is an
increase of 50% from the 1980s.
You have many young adults that simply cannot move out on
their own even for a rental:
And if you are looking to buy in today’s house humping
market be prepared to pay a premium because inventory is pathetic:
leads us to a generational low homeownership rate:
So what you have is a rental market that now has many more
single family homes as rentals and many more renters are viewing these places
as permanent versus transitory apartments.
The fact that many more renters are staying put reflects this change. And why would a landlord argue with
this? It is great to have long-term
tenants. And for many, this meets their
needs instead of buying an overpriced shack.
Inventory remains pathetically low and younger American
adults in large numbers are simply staying put and living at home with mom and
dad. This is not a typical housing
recovery. This is a distorted market and
this is the outcome of mapped out bailouts with the banks, hedge funds buying
up single family homes, and builders becoming reluctant to build.
People try to paint this recovery as a broad one but what
this is highlighting is that this “recovery” is essentially jamming 100 hungry
people into a restaurant and saying that the first 20 people that get to the
counter will get a cold taco. Everything
is relative and right now, that dump of a home with crappy construction and
toxic mold is looking appealing at $1 million.