Until a few years ago, well over 1 million new households were formed every year in the U.S. When the recession hit, that number dropped to around 600,000 new households a year. Experts say the number may start climbing over 1 million again as soon as this year which is good news for apartment building owners and real estate professionals.
For rental properties, experts see specific demographics generating most of the demand. Here’s a picture of who is renting by demographic group:
- Under age 35: 63%
- Single Men: 50%
- Single Women: 47%
- Blacks: 55%
- Hispanics: 53%
- Household income under $30,000: 52%
Demand for rental units has increased substantially since the recession began. In response, builders have developed more multi-unit properties and expect to market more of these properties this year. The average rent is now at about $850 a month. By comparison, average monthly mortgage payments have dropped substantially in the past few years and stands at about $600 a month. Some observers hope this state of affairs will prompt more consumers to consider home ownership again. The rate has dropped to 66% in recent years.
But, as a percentage of income, housing costs are taking a bigger bite. Research shows that 20 million households now spend over 50% of their pre-tax income on housing. A decade ago, only 14 million households were in that position. These numbers are equally split between renters and homeowners so both sector are showing the financial strain.
Because the overall cost of housing is rising as a percentage of income and because many jobs now being created are at lower wages than before, any significant improvement in the home sale market is likely to be slow and unsteady. As a result, real estate professionals will be heavily promoting rentals of multifamily units and even the rental of single homes which are owned by investors.[Source: The State of the Nation’s Housing 2012. Jchs.harvard.edu. 2012. Web. 27 Jun. 2012]