The US rental market is now running at its highest level since 1965 as more people now look to renting as opposed to an outright purchase of their home. A survey showed that in 2016 36.6% of household heads rented their homes, a level which has not been achieved since 1965 when it stood at 37%. When you also bear a mind there are now an additional 7.6 million households in the US over the last decade and household head ownership has remained static in number this just about says everything.
Why the increase in rental numbers?
There are a number of suspicions as to why rental numbers have increased to near-record levels. They include ever increasing amounts of student debt and concerns about a future house price collapse. These would appear to be the main issues in the back of a potential house buyers mind as they look to part with their hard earned cash. This is also reflected in the numbers for those aged 35 and under with household head rental numbers now standing at 65%, up 8% since 2006. So, it does seem as though the younger generation is struggling to climb aboard the property ladder?
The financials
If we take a step back and look at the situation from a distance, at this moment in time first-time buyers are being asked for ever greater deposits. As many of the potential first-time buyer market may not be in a position to cover this deposit they then obviously look towards the rental market in the short term. There is also a suspicion that the younger generation is more likely to move around the country for employment and social reasons and therefore concerned about putting down roots too early.
The greatest regret of a renter
Interestingly the greatest regret that many renters have today is not buying their property outright. They have seen the property price trend continue to move higher and higher over the years. It is only human nature to look back and wonder “what if” but it is easy to forget about the financial situation at the time. It is also very easy to look back with hindsight and wish you had acquired a property when it was half the price. Hindsight is a beautiful thing!
Whether we will see more first-time buyers taking the plunge in the short to medium term is debatable. While the first few years are the most difficult, as incomes increase in the longer term the pressure of finding capital for repayments can lessen significantly. However, it is getting over the hump of those first few years which puts many people off and can be a challenge.
Self-fulfilling prophecy
As more and more first-time buyers struggle to climb aboard the US property market ladder this seems to have forced more people into renting. As renting increases so does investment by property investors acquiring houses to rent in the private sector – and the self-fulfilling prophecy begins. The US government, as with others around the world, has introduced an array of financial assistance for first-time buyers but in many cases this is just tinkering on the edges. A lack of affordable housing is the main problem, ever stricter regulations on mortgage finance and relatively little assistance for first-time buyers are also issues which need addressed.