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Who Rents Single Family Homes and Why


Since the housing market went poof ten years ago, single-family home rentals have seen significant growth, according to a research report from Mark Zandi, the chief economist of Moody’s Analytics. What’s driving renter demand?

More Foreclosures

“The single-family rental market has enjoyed a strong run in recent years,” Zandi said. “Demand has been fueled by the foreclosure crisis and declining homeownership. Many families displaced by the crisis much preferred to rent a single-family home over an apartment. Prospects for continued strong single-family rent growth are good.” 7.5 million households will have lost their homes and many of them have since become renters of single-family homes just like the ones they owned before.

Greater Challenge in Getting Financing

Not surprisingly, the ability to get mortgage credit has tightened since the real estate burst in 2008. Credit requirements have stiffened, while average credit scores declined and bankruptcies proliferated. Bankruptcy filings, which peaked in 2008 at 4 million, according to the American Bankruptcy Institute, remain on creditors files for at least seven years. Despite many BKs having aged enough for removal, many still remain, as does the challenge of securing credit.

Lower Upfront Costs

The average down payment in the U.S., according to a study from RealtyTrac, shows that buyers who purchased a home in 2014 put 14% down, or $32,141 on a home. The average down payment in the 25 highest-priced counties was 24% ($138,547), twice the average down payment in the 25 lowest-priced counties of 12% ($8,239). Renters, by contrast, at most need to fork out first month’s rent plus a security deposit, and maybe a pet deposit.

More Flexibility

Here’s another reason renting is good for many: it provides greater flexibility for renters expecting to relocate for a new job in the near term, without being locked into a long-term mortgage, or the potential lengthy time required to sell a home.

More Choice

More homes available for rent means more choice for renters. In fact, the single-family rental share of the entire housing stock has increased by 44%, from just over 9% a decade ago to more than 13% today. Source: National Rental Home Council.

More Room

Large families have gravitated toward renting single-family homes, too, because of the greater amount of space provided. According to Multifamily Executive, as of 2013, the average apartment size today was 982 square feet. By contrast, the size of the average new single-family home built sine 1990 was slightly more than 2,000 square feet. (Source: U.S. Census.)

Less Expensive

"Rents are also low relative to house prices in many markets across the country,” Zandi of Moody’s said.

What Do Renters Think About Renting?

Source: Fannie Mae National Housing Survey 2012

For more information on why your should consider investing in a professionally managed portfolio of single-family homes, please contact Harold Willig at 917-209-4452 or harold.willig@springviewinvestments.com

Harold Willig is the Manager of SpringView Investment Management, LLC, which he founded in 2012. Mr. Willig also served as HFZ Capital Group’s Chief Financial Officer, and was responsible for the oversight of HFZ's Finance and Accounting team. He has over 16 years of finance and accounting experience. Mr. Willig also ran a consulting practice and provided valuation, analysis, and transactional support services to multi-billion dollar real estate companies. Previously, Mr. Willig served as the Senior Controller and Vice President of Financial Analysis and then the Chief Financial Officer of the Athena Group, a multifamily development company and fund manager.

This post does not constitute investment, tax, legal, or real estate advice. It is not a recommendation or an offer to buy or sell. No warranties implied. Past performance does not guarantee similar future results.

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