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Investor Rental Market Outlook: 2016 & Beyond

By HomeBay on 1/30/16

The Joint Center for Housing Studies of Harvard University published a report that covered the recent history and predicted future of the rental market in the United States. The past decade (from 2005 to 2015), saw unprecedented growth in demand for rented homes with people in every income group and age bracket. This trend held true for singles, couples, and both one- and two-parent families with children. Let's take a look at some of the details. photodune-11076635-house-for-rent-s.jpg

Renter Statistics:

  • Growth in rental demand was largest for people with incomes lower than $25,000; a group that accounted for four million new renters over the past decade.
  • Growth for people with household incomes over $50,000 accounted for 3.3 million new renters.
  • There was an increase of 1.6 million renters for those with incomes over $100,000 a year.
  • The amount of rental stock also grew, and the single-family house share of the market increased from 34-40% of the total rental stock.

The rental market definitely took a hit during the Great Recession; however, it began to recover in 2010. Since then, the vacancy rate has decreased sharply across almost all major markets.In fact, the vacancy rate was less than 5%  in 75% of the United States largest cities by 2015. 

The American Rental Market is Becoming a Seller's Market

The main concern expressed by the Harvard study and many city planners is that rental supply can't keep up with demand in many markets. Because high-income renters are entering the market in greater numbers, low-income renters may have trouble finding affordable housing.

However this is good news for property owners and managers who may be able to enjoy higher rental rates and very low vacancy rates. Demand is growing for all kinds of rental of all types and prices. Properties for people with modest incomes are the most in demand right now, but there has also been significant growth in luxury rental seekers.

Looking Forward

The study predicts that demand will keep growing throughout the next ten years. Millions of single-family homes have been converted from owner-occupied houses to rental units and at the same time, there has been an increase in the construction of multi-family complexes. However, very low vacancy rates and higher rents indicate that the new supply has not kept up with the booming demand.

This is all good news for investors interested in purchasing rental properties. The demand is there and is expected to continue to grow for the foreseeable future.


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