It’s happening right before our eyes; America is becoming a renter nation. Gone are the days of the American Dream with the white picket fence. Buying a house has become out of reach for many Americans.
On this episode, we’re going to discuss what’s going on with the housing market, why so many people are turning to renting, and what this means for real estate investors. Click play to learn more!
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The average 30-year mortgage reached a record high for 2024, at over seven percent, according to Freddie Mac. As you know, these mortgage rates have put a massive damper on the homebuying market. As rates make mortgage costs more expensive, more and more Americans are finding homeownership out of reach.
On top of this, homeowners who are locked into record low mortgage rates are hesitant to sell. It’s understandable why these people are holding onto their properties – why swap a 3% rate for 7%? It’s been estimated that more than 90% of American homeowners are locked into rates below 6%.. The math just doesn’t make sense for most homeowners. In fact, a Redfin survey reported that nearly 2 in 5 homeowners don’t believe they’d be able to buy their home in today’s housing environment.
There has been a supply issue in the housing market for years now, but because of the way interest rates have influenced homebuying trends, the demand for rental properties has increased nationwide.
So many people are priced out of this homebuying market. With the average monthly payment on a mortgage being north of $2000, it’s incredibly expensive to buy a home today. A recent Zillow report found that new homebuyers would need to make six figures to afford a house in this current housing market—this figure is up 80% in 2020.
There is such a massive housing shortage – and interest rates are one key indicator we need to move in order to add more supply to the market. A report from Realtor.com found that the supply of available homes has dramatically decreased 34.3% since before the pandemic. The supply issue combined with the higher rates is creating a massive barrier to entry in the housing market, especially for Millennials and Gen Z. And for these generations especially, America has become a renter nation.
Senior economist at Nationwide, Ben Ayers, commented on this scenario. He said, “Market conditions for homebuyers remain challenging with few homes listed and costs for ownership still climbing. Despite strong fundamentals for demand from demographics and a strong labor market, many first-time buyers are being shut out of the market by elevated financing rates and rising prices.”
And it’s not getting better anytime soon… A CoreLogic projection predicts home prices to rise slowly and steadily for the rest of the year, so things are not looking up for anyone looking to buy a home, especially those first time, younger homebuyers…
So clearly, the best alternative is renting. Renting provides a great opportunity to build credit, have some flexibility, and dodge the responsibilities of owning a home before you commit to homebuying. And of course, there are people who choose to rent for a lifetime out of personal preference.
But the way the economy is, most renters cannot afford to save for a down payment and end up renting out of necessity.
I know, there are a lot of differing opinions on this renter nation issue. Certainly, some people have an unfair advantage over others, and both younger and lower income people are struggling the most… But no matter how you feel about it, this is unfolding in front of us. America is becoming a renter nation. A research report by the Urban Institute concluded, “The pace of renter growth will be more than double the pace of homeownership growth from 2020 to 2040.”
This is why what we do at Morris Invest is so important – the build to rent space is very attractive to professionals and families who either choose to rent or need to rent for a period until they have the opportunity to buy.
A build-to-rent home is especially attractive to young families and professionals who intend to set down roots in a community – the properties are new, there are great amenities shopping, and attractions. A new construction home provides more privacy than an apartment can.
So for anyone who is looking for a way to protect their money and build their financial future, built to rent housing is a safe bet. On top of the returns you can earn, investing in build to rent housing allows you to provide homes to people that need a nice, safe place to live. Build-to-rent provides great rental units to the market without taking away any existing inventory. We need more good landlords in this country – not hedge funds.
If you’re interest in our build-to-rent properties at Morris Invest, just come on over to our website, morrisinvest.com and schedule a free call. We’d love to learn more about your goals, tell you more about what we do, and discuss if working together would be a good fit.
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