Apartment Rental Market Expected to Boom
Ask anyone in the real estate business and they’ll tell you the housing market has changed drastically in the past few years. Census Bureau data indicates that between 1945 and 2007, we were a nation of movers with up to 20% of us relocating annually. Often the moves meant consumers were selling one home and buying another. But in 2008, the mover rate dropped to 11.9%. Though that rate increased slightly to 12.5% in 2009, the top line numbers don’t show the whole story.
Writing for the Wall Street Journal, Conor Dougherty highlights salient data points from William Frey’s, Brookings, analysis of mover statistics. According to Frey, people are moving this year and they moved last year, but these moves are typically intra-county moves. About 8.4% of consumers moved within their county while only 1.6% moved to another state. This move pattern contrasts with 1991 activity when over 10% of consumer moved within their county and about 3% moved between states.
In 2008-2008, 13.9% of consumers who moved within the county for housing related reasons said they were seeking less expensive living arrangements. It’s reasonable to consider that a fair percentage of the movers were leaving foreclosed homes and moving to apartments. Frey sees cause for concern in these numbers. “Since labor migration is often seen as the grease that spurs the flow of goods, capital and job creation, these new numbers are not encouraging.”
Beyond the move statistics are the home ownership numbers which have dropped from 69.2% in 2004 to 67.6% to 2009. Financial analysts expect to see more growth in the rental market because of homeowners who are underwater when they compare the current market value of their homes to the outstanding balance on their mortgage. Some of these homeowners will go through foreclosure and enter the rental market. Others will select the “strategic default” route and walk away from their homes and into apartments. Either way, the slow real estate market points to continued difficulty for home sales. On the other hand, apartment building owners, which had been struggling in recent years, will be marketing the amenities of the rental lifestyle.[Sources: Dougherty, Conor. “Migration Data Suggest Homeowners Becoming Renters.” Wall Street Journal. 11 May 2010. Web. 12 May 2010; Frey, William. The Great American Migration Slowdown. Metropolitan Policy Program at Brookings. Brookings.edu. December 2009. Web. 11 May 2010; Whitehouse, Mark. American Dream 2: Default, Then Rent. Wall Street Journal. 16. Dec. 2009. Web. 11 May 2010]