The supply of empty homes for rent
is falling, and the nation’s homeownership rate is hovering near a fifteen year
low.
How can that be when the housing
market is finally turning around and more homes are selling?
The answer is simple: Investors.
The nation’s home ownership rate
ticked up a statistically insignificant basis point, from 65.5 percent in the
first quarter of this year to 65.6 percent in the second quarter, according to
the U.S. Census Bureau. Q1 was the lowest home ownership rate since 1997 and is
down from the peak of 69.4 percent in 2004.
Given that home sales improved
significantly during the first half of this year, you would think that home
ownership rate should have surged higher, but the rate is calculated using only
owner-occupied homes. If an investor buys one home or 100 homes, those homes are
not even put into the calculation because they owner doesn’t live in the homes.
Realtors estimate around 20 percent of homes sales are currently to investors,
but given bulk deals offered by the government and banks on foreclosed
properties, that percentage is likely higher.
“The very modest increase in the homeownership rate in Q2 does not persuade us to alter our view that the share
of the population who own their home will fall further over the next couple of
years,” writes Paul Diggle of Capital Economics. “Meanwhile, supply conditions
in the rental market are tightening, with a falling proportion of single and
multi-family rental homes vacant.”
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Rental vacancies in fact fell to
their lowest rate since 2001. That is why so many investors are rushing in to
buy distressed properties. The rental market his hot and getting hotter. Average
asking rent rose 5 percent from a year ago, though they are down slightly from
the previous quarter.
Since the peak of home ownership
in 2004, six and a half million additional U.S. households are renting, which
calculated is equivalent to 90 percent of the increase in total household
numbers over that time. It's estimated that home ownership will fall to 64 percent over
the next two years.
An investor-driven recovery in
home sales is certainly positive and is helping to clear the huge backlog of
distressed properties on the low end; investors are necessary now, but until
real owner-occupants, including the all-important first-time home buyer, return,
a robust recovery in all price tiers of the market will remain out of reach.
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