Prompted by a number of shifts spurred but the Great Recession, single-family housing may be witnessing the dawn of a “new age” as more homes in certain metros are converted into rental units, a recent report suggests.
The impacts of the Recession led many American households to the rental market as the homeownership rate declined from a high of 69.2% in 2004 to 65.3% in the third quarter of 2013, according to a February edition of CoreLogic MarketPulse.
“The surge in foreclosures driven by elevated unemployment, falling house prices and sustained negative equity forced many households to turn to the rental market for housing,” wrote CoreLogic Senior Economist Kathryn Dobbyn.
Economic uncertainty also slowed household formation for many would-be homeowners struggling with high unemployment, suppressed income growth and even swelling levels of student debt.
All of these factors contributed to a higher demand for rental housing, which was satisfied by a growing number of former owner-occupied single-family homes converted into rental units, Dobbyn notes.
Concentrating on the single-family rental market for the Los Angeles metropolitan area, CoreLogic notes a surging demand for rental properties came onto the market during the grips of the Recession.
While rental demand and supply remained constant in the years prior the Recession from January 2004 to July 2006—at an average of 420 single-family homes rented and an average of 1,350 homes listed for rent—a surge in new inventory listed for rent hit the market in mid-2006.
By early 2009, supply peaked at 5,200 active rental listings rental, with an average of 750 houses being rented each month during that time period since mid-2006.
Growth in the single-family rental market continued each year since then, reaching a new peak recently with 1,770 units rented in July 2013.
Despite the demand for single-family rental housing in L.A. having quadrupled since 2004, whether this trend will continue into 2014 remains to be seen.
But certain factors could drive more would-be homeowners to the rental market, such as the implementation of new mortgage regulations that may make it more difficult to qualify for a mortgage.
“Less access to credit, alongside reduced affordability due to rising house prices, means the rental market may continue to be an attractive or necessary option for many households in the near future,” Dobbyn writes.
Written by Jason Oliva