And it’s not just about the foreclosure crisis converting hundreds of thousands of previous homeowners into renters.
The number of renters surged by 5.1 million in the 2000s, the largest decade-long increase in the post-war era.
Of course, the spike was fueled heavily by the trends that emerged out of the 2007-2008 housing market collapse, including an unprecedented wave of foreclosures and a growing subset of homeowners dubbed “underwater” borrowers because they owe more than the plunging values of their homes.
A new report on the housing market by the Joint Center for Housing Studies of Harvard University reaffirms that the rental market is not only booming – but it’s poised for even more growth.
Big factors still looming include the growing number of boomers who will opt to downsize into rentals and the prolonged recovery of the jobs market, which is keeping college graduates – already beset by student loan debt in many cases – from home ownership and relying on rentals for a longer period of time than had been the standard.
More middle-aged and middle-income Americans who were typically homeowners are now becoming renters, many convinced that owning a home is no longer a financially advantageous option, even in the longer term.
“In part, this growth (in renters) reflects disproportionate shares of young, minority, and lower-income households, who are traditionally more likely to rent,” said the report on housing from Harvard University. “But the foreclosure crisis and the aging of the population have also spurred increases in renting among the middle-aged, as well as households that are white, married, and have moderate incomes.”
Declines in the national homeownership rate accelerated in 2011 as increasing numbers of households opted—or were forced by foreclosure—to rent. The national homeownership rate dipped to 66.1 percent, down 0.7 percentage point from a year earlier and 2.9 percentage points from the 2004 peak.
A result of surging demand in rentals has brought increasing rental prices.
According to research cited by the Harvard study, rents on investment-grade multifamily properties outpaced inflation in 38 of the 64 U.S. markets tracked during 2011.
Of the remaining cities, all but one (Las Vegas) posted at least nominal rent increases in 2011. Adjusting for inflation, San Francisco led the nation with a double-digit rise, but real rents in metro areas in the Northeast (Boston and New York), South (Austin), and West (Denver) were also up 3.0–5.0 percent.