The rental boom has been especially strong among millennials. Home ownership among those 35 and younger has fallen from 43.6% to 35.9% over the last 10 years, according to Freddie Mac.
Meanwhile, construction of new buildings with at least five apartments has hit its highest monthly pace since 2006. And the increased number of tenant households have pushed vacancy rates to their lowest level since 2000, and rents, when adjusted for inflation, have returned to peak levels not seen in 14 years. Rents have increased even more in large metropolitan areas.
“The apartment market has been vibrant, reflecting the desire of many Millennials to live in an urban setting and retain locational flexibility,” said Frank Nothaft, vice president and chief economist for Freddie Mac. “Unfortunately, if they're looking to live in the larger cities, that's where rents are rising the fastest, especially in the West or Northeast regions of the United States, places like Los Angeles and New York City. In the South region, areas like Miami and the Washington-Baltimore metro have seen real rents exceed the U.S. average. But in the Midwest, only the Chicago metro area has outstripped the U.S. average.”
While the single-family sector continues its slow climb back to normalcy, the multifamily sector is booming, according to new data from Freddie Mac. In fact, all growth in net household formation has been among renters.