From Home Furnishing Business
Rent—The New Dream
Over the past five years the housing industry has seen the number of renters in all ages and income levels increase.
While the housing market crash was a huge catalyst with staggering foreclosures and short sales, many potential homebuyers are continuing to forgo purchasing and are turning to rentals. Who are those opting to rent today compared to five years ago?
The ages, marital status, and income levels are somewhat surprising. Recently released American Community Survey conducted by the Census Bureau, tracks the profiles of homeowners and renters.
Householders by Age
In the five-year period from 2009 to 2014, every age group saw an increase in the number of households renting versus owning. In addition, age groups under 55 years all experienced double-digit decreases in the number of homes owned.
Total households grew 3.2 percent; however, owner-occupied units fell 1.3 percent while apartment and home rentals climbed 11.4 percent.
For homeownership, the largest segment continues to be the 65-and-over age group, while the under 35 set is the largest rental group. Table A shows the percent of owner and renter occupied units by age group.
The shift in rental versus ownership is unique to each age group.
Under 35 Years—Young Millennial householders under age 35 are traditional apartment renters. More than 68 percent of the age group rent apartment and homes.
These young adults have been slow to form households in the last five years choosing instead to return to parent homes or a roommate scenario. The under 35-year-olds have decreased their ownership of housing by 16.7 percent from 2009 to 2014 while renters have increased 2.0 percent.
Ages 35 to 44—During the recovery from the recession, many young families were squeezed out of the housing market due to tight money and job instability. Table C shows that homebuyers in this age group in 2009 were overwhelmingly home owners—63.4 percent. In 2014 that figure had fallen significantly to 57 percent of the households.
Ages 45 to 54—As many in age group 45 to 54 typically upgrade housing, ownership has fallen 10.3 percent from 2009 to 2014 as renting picks up that loss—gaining 10.9 percent of occupied housing units more than 5 years. However, these mature homeowners still own 68.2 percent of their homes, down from 72.9 percent in 2009.
Ages 55 to 64—While ages 55 to 64, the core of the Baby Boomers, increased the amount of owner occupied housing units by 8.7 percent, renter occupied housing units have risen by 30.7 percent from 2009 to 2014. Only a quarter of these householders rent apartments.
Ages 65 and Over—As Baby Boomers move into the older age group, a rising need for senior and assisted living rentals is occurring. A jump of 21 percent in renters occurred from 2009 to 2014 alongside a growth of 14.7 percent in those owning their own residence. Seniors 65 and over are the largest segment of homeowners and almost 80 percent own their own homes.
The mix of household characteristics between owners and renters has changed little in five years. As expected, married-couple families are the majority of owner-occupied housing units— accounting for 60 percent in 2014. Surprisingly, householders living alone make up 27.8 percent of all housing units. The following Table H shows the breakdown of owner and renter housing units by household characteristic 2009 to 2014.
Financial Characteristics of Householders
Overall, apartment dwelling is increasing across all income levels 2009 to 2014. Households with incomes under $100,000 have been slowly migrating away from homeownership toward apartments. For incomes $50,000 to $99,999, ownership decreased by 6 percent while rentals increased 23.9 percent. The number of housing units with income under $50,000 declined in total 3.6 percent, with owner occupied units taking the hit. This income group makes up 65.8 percent of rental units.
Table H shows the percentage of housing units owned versus rented by income group for 2009, while Table I shows 2014—depicting the apartment growth in the two lower income groups.
Return to Homeownership
At the end of the second quarter in June, the rate of homeownership fell to its lowest level in 48 years, 63.5 percent. Several indicators point to homeowners taking back some market share in 2016 and beyond. The job market is improving, homebuilding is gearing up, and credit is projected to loosen. Household formations are currently growing by leaps and bounds. Census Bureau figures show year-over-year household formation topping one million for three straight quarters. Both owner occupied homes and rentals should benefit.
Most Americans have looked at homeownership as part of the American dream. However, many Millennials have witnessed during the recession and recovery the darker side of homeownership and see home buying as a risky investment. They may be slow to go all in.