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Home ownership declines in Orlando


In August 2016, the U.S. Census Bureau announced that the nation’s home ownership rate has hit a 51-year low, falling from 63.5 to 62.9% in the second quarter of 2016 alone. There are fewer homeowners than since 1965, the first year that Census Bureau data is available.

Home Ownership Levels

Historically, home ownership levels have been around 65%. They peaked in 2004, when home ownership rose to 69.2% before leveling off.  The Census Bureau’s latest report came as a surprise to many as the national home ownership rate declined to 62.9%.

With home ownership down the number of renters is rising. It is estimated that 363,000 new renter households were formed in first quarter of 2016.  Almost twice as many that were formed during the same period in 2015.

A Few Facts about Renter

In a 2016 Harvard University study :

  • 37% of all U.S. households (about 110 million people) were renters.choosing home ownership
  • From 2005 to 2015, the number of renter households increased by almost 9 million. This is the largest increase in any 10-year period on record.
  • Since 2005, renters have accounted for all the net growth in households.
  • Baby Boomers added 4.3 million net new renters over the past decade. Gen X added 3 million and Millennial’s that added 1 million.
  • More than 50% of city dwellers rent their housing, compared to 28% in the suburbs.
  • 33% of renter households earn less than $25,000.
  • 11% of renter households earn $100,000 or more.
  • 31% of renters have families with children, compared to 27% of homeowners.

The addition of 9 million net new renter households over the past decade is having a tremendous impact on the nation’s rental housing inventory.

Rental Housing Supply

After the housing bubble, many investors found it could be highly profitable to purchase single family homes that were underwater or being foreclosed upon. In fact, nearly two-thirds of the homes have been converted into rental properties over the past decade.

However, strong market demand and historically low interest rates have sparked a blast in new apartment construction. Multifamily rental housing construction is at the highest production level since the 1980s.

Rental Housing Prices

The shift from home ownership to renting is creating a severe supply-and-demand disparity that is driving rents up year over year.

As of September 2016, the national median rent for a 1-bedroom apartment was $1,120 per month. A 2-bedroom apartment averaged $1,280 per month, representing a 2.1% year-over-year increase.  Some Orlando communities have experienced much higher increases.

Because supply has not kept up with the rapid rise in demand, we are experiencing the longest period of rental market tightening since the late 1960s. The national rental vacancy rate has fallen each year since 2010, hitting 7.1% in 2015, a 30 year low. Professionally managed properties reported an average vacancy of 4.2% in 2016, a 0.30% decline from the prior year. Home ownership rates have declined to a record low, and they might fall further still before the trend is reversed.

Strong immigration will drive the demand for rental housing. Some estimates are that minorities will represent more than 75% of net new household growth over the next decade. Also, minorities are historically more likely to rent than to own a home.

Millennial’s will continue to rocket the number of new renter households as they mature. 50% of Millennial’s are still in their teens.  Baby Boomers are approaching their 70s, and we expect many to transition into rental housing.

Other social and economic forces such as high student debt, poor credit, and limited availability of mortgage loans will keep many from buying homes. Still others delay home ownership to pursue higher education and career opportunities. We are seeing that many young people postponing marriage and child rearing further delaying home buying.

In summary, it is very likely that rental demand will continue to be strong and grow stronger for the foreseeable future for many reasons.  Now is an excellent time to grow your  real estate investment portfolio in Orlando so that you can achieve financial freedom for yourself and family.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.

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