Demand for rental properties has been a major driver of the housing market recovery in the United States. The proverbial adage of buying a home being cheaper than renting holds more value today than at any other time in American real estate history, and yet the demand for rental properties is quickly outpacing supply.
The most common image that comes to mind when talking about rental properties are condominiums, apartment complexes, town houses, and multifamily residential units. There are always a few renters looking for single-family homes, but the lower demand ensures that they have plenty of options to look at. In the current housing recovery, however, the demand for single-family home rentals has turned into a shortage.
According to a report by real estate analytics firm CoreLogic, the housing markets that have seen the greatest demand for single-family homes by renters are the same markets that suffered the most under the weight of foreclosures. Those markets are the same where heavy subprime mortgage lending took place; the same markets where large middle and working-class families accepted risky home loans they could not afford when the job market took a turn for the worst.
Real Estate Investors Turn the Tide
Single-family homes in the United States have traditionally fallen under the purview of average homeowners and small-time real estate investors. Major investors preferred to jump on the rental game by acquiring apartment complexes, condominium towers and town home developments. That trend has changed in the last few years as institutional investors are scooping up bargain single-family residences and putting them up for rent.
Major investors now own 20 percent of the 21 million single-family homes available for rent in the U.S. In housing markets like Port St. Lucie in Florida and Tucson in Arizona, demand for single-family homes has gone up by more than 25 percent since 2011. The former ghost town of Cape Coral in Southwest Florida is jumping back to life thanks to renters looking for reasonable lease contracts.
Monthly Rent Payments vs. Home Prices
As the housing economy in the U.S. continues, renters can expect to make higher monthly payments, but at rate lower than overall median home appreciation. In Cape Coral, for example, rent payments have jumped six percent in just one year. Since rent payments tend to show greater price stability than home prices, Cape Coral is already shaping up to be the next speculative regional housing market.