Study Says Moving Households are Renting, Not Buying
A recent study showed that 1.2 million U.S. households were lost from 2005 to 2008. The loss occurred while the populations increased by 3.4 million.
The study, released by the Mortgage Bankers Association (MBA) reports that this decline likely contributed “significantly” to the current glut of apartments and single family rental homes on the market.
What happened, according to the study, is that individuals (adult children leaving a family home, couples or roommates who split up) did not strike out on their own to form new households; instead, they joined households already in existence. Foreclosed homeowners fit the category too; the study suggests that many have delayed their entry into a new housing situation (usually rental housing) and have instead been absorbed into existing households.
Once the job market stabilizes, household formation is expected to pick up—mostly because young people will feel more stable once they have a paycheck and a sense that their job isn’t going away. That’s good news for rental property owners and managers.
Even though recession is officially over, unemployment rates are not predicted to fall by any more than 2 percentage points by the end of 2012. The study indicates that it will take that long before normal rates of household formation (1—1.5 million per year) are seen again. And when it does, it will disproportionately benefit the rental market at first.
It looks like the housing over-supply will continue for the foreseeable future. But another piece of good news for rental property owners is that households who have moved were more likely to rent than to buy. Many families have suffered significant losses to wealth; down payments to purchase homes will be more difficult to come by.
Some interesting statistics from the study include that national home ownership fell from just over 69% to just over 67%—but the rental market saw steep declines, too--which only happens during periods of recession with high unemployment. And not surprisingly, children of higher-income parents tend to remain at home longer during recessions.