Future of Rental Markets

According to an August 11 2016 Wall Street Journal by Laura Kusisto, home ownership is declining. Home ownership is at the lowest rate since numbers started being collected in 1965.  “In all, [says Kusisto] some 200,000 to 300,000 fewer US households are purchasing a new home each year than would during normal market conditions.”

According to the article, home ownership fell to 62.9% in the second quarter of 2016.  It could fall to 58% or lower by 2050, according to housing experts Arthur Acolin of the University of Southern California, Laurie Goodman of the Urban Institute and Susan Watcher of the Wharton School at the University of Pennsylvania.

This all means a robust market for apartments and for single family rentals, far into the future.

Most experts say the reason for lowered home ownership is economic inability to afford the payments due to huge student debts, and difficulty in obtaining mortgage money.

In my personal opinion, the reasons almost do not matter. If a generation becomes used to the idea of renting housing and building wealth through investments (rather than through home equity buildup) then the rental habit will persist.  Younger generations want instant upgrades for everything in their lives. Do you really think they will be happy locked into an illiquid asset like a home, when renting makes more sense? I don’t think so.

Bottom line–keep up your investment activities!