Demand for single-family rentals is on the rise
Rental houses have been in high demand since the housing market crashed, but a lack of supply has made renting those homes more expensive—and out of reach for some. That's according to new Zillow analysis which found that the median monthly rent for single-family homes is rising faster than the median monthly rent for apartments.
Zillow, an online real estate database company, reported that nearly half of all renters consider renting a single-family home, but less than a third actually do. While rents for both houses and apartments have slowed significantly over the past year, median rent for houses rose 1.3% annually to a monthly rent payment of $1,404, but median rent for apartments rose 0.5%, to a monthly rent payment of $1,551.
There are fewer single-family homes to rent than a decade ago. When the housing market crashed, investors grabbed many single-family homes lost to foreclosure and turned them into rentals. Almost 20% of all single-family homes across the U.S. were rented in 2016, up from 13.5% 10 years prior.
Meanwhile, rentals are in increasingly high demand because many aspiring homeowners don’t have enough money to buy a home. For example, a 20% down payment on a typical U.S. home costs more than two-thirds of the median household income, but can cost up to 180% of the median household income in pricier housing markets like San Jose and Los Angeles.
“When the market crashed, many families lost homes they owned during the foreclosure crisis, and now may not be able to afford to buy another as home prices rise," said Dr. Svengali Gudell, chief economist for Zillow. “Those who want to buy are finding it difficult to find the right one, or may need a bit more time to come up with a down payment, but still want the advantage of space that single-family residences often provide. This, coupled with the foreclosure crisis turning millions of homeowners into renters, is a big reason why demand for single-family rental homes has risen over the last few years.”
Other key findings:
An increase in multi-family units, thanks to new construction trends over the past several years, has kept multi-family rents virtually flat.
Single-family rents are rising faster than multi-family rents, led by Portland, Ore., New Orleans and Chicago.
Generation X renters (ages 38-52) are significantly more likely to rent a single-family home than any other home type. More than 40% of Generation X renters rent a single-family home, compared to 25% of millennials (ages 18-37) and just 10% of Silent Generation renters (ages 73 and over).