RealEstate Investing :More People Renting Than Buying Homes

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It shouldn’t shock anyone to know that home ownership is on the decline. With an increase in foreclosures, a tough job market and President Obama backing off from policies that encourage home ownership, it’s no wonder.

At the height of real estate market, the rate of home ownership nationally was 69%. In 2010, the rate dropped to 66.9%. Historically, rates have stayed around 64%.

According to REIS (via CNBC) which tracks rental vacancy rates, the national rate of vacancy has been on the decline. In the first quarter of 2011, the rate was 6.2%.

“All of those things are reflecting in the home ownership rate that is still somewhat declining, and it’s generally favoring the rental market,” Victor Calanog, Reis’ vice president of research and economics, told Reuters.

In a recent LA Times article, demographer Cheryl Russel says that 25-to-29 year-olds are looking towards renting more than home ownership.There are several reasons for this:

-  Shrinking middle class wealth (Mom & Dad used to be able to help the kids out with home buying and that is less likely now)

-  Large student debt

-  Uncertainty in the job market makes the flexibility of renting more desirable

I see this in all the time in the Greater Hartford real estate market these days: high earning young professionals who don’t want to be tied down to anything, especially not a home. A few years ago, single home buyers were everywhere. Now, they’re looking for nice, quality apartments that they can leave if they need to change jobs. Many of these young professionals are worried about losing their job altogether and see renting as a way to save money.





In West Hartford, a typical 2-bedroom apartment may rent for about ,200 - ,400. For the same amount, you could buy a similarly sized 3-bedroom, 1 bath home in West Hartford for between 5,000 and 0,000. But in West Hartford, that price range doesn’t give you a lot of choices.

Then there is the consideration of monthly costs. With a rental, you are not responsible for maintenance and repairs. You do get to claim the mortgage interest deduction on your taxes but that may not offset the cost of ownership.

As demand for rentals increases, rental rates are likely to go up. It’ll be interesting to see by how much and if that helps the multi-family purchase market.

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