Renter Nation: Homeownership to Decline for Next 15 Years

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With volatile markets, weak global economic growth, and incessant turmoil wreaking havoc, many investors have become desperate for higher-yield opportunities. While some are having a tough time finding such investments, others have shifted to the stability, and higher-yielding opportunities found in commercial real estate.  While this asset class does carry its own risks, the fundamentals will remain strong, long-term.

In fact, one area of commercial real estate seeing a great deal of interest is in multi-family units, as we just begin to see a significant structural shift in the number of renters, as compared to the number of buyers.

Renting is becoming the ‘new normal,’ notes the Urban Institute, which just revealed that homeownership in the U.S. will continue to decline for the next 15 years.  “The reason is simple,” they note.  “In the millions of new households forming over the next 15 years, new renters will outnumber new homeowners – causing a sustained surge of rental housing demand that will significant affect millennials, seniors, and minorities.”

An important fact to understand is that the majority (59%) of 22 million new households that will form between 2010 and 2030 will rent.  Just 41% will buy homes, as noted by the Urban Institute.  Perhaps this is why rents have been increasing as they have.  In fact, the annual rise in rental income just approached 4%, nearly four times the rate of inflation.

As I’ve noted in prior blog posts, if you’re looking for sustainable near-term growth, pay close attention to rental units.  They’re filling up quite fast and showing no real signs of slowing in the immediate future, creating a great opportunity for rental property owners and investors looking for high-yield returns.