Photo: Ian Sane/Flickr
Demand for rental homes is high and a lack of supply is driving prices up, according to a report released today by the listing site Zillow.
Over the last year, the median rent for houses rose 1.3 percent to $1,404, while the median rent for an apartment increased just 0.5 percent to $1,551 over the same period.
Median rent for houses is increasing more rapidly than median rent for apartments in half of the 50 largest metro areas, says Zillow. Portland, OR is one of the most extreme examples of this trend, where monthly rent for houses is rising at 4.5 percent annually while monthly apartment rent is falling.
Nationally, 19.2 percent of all single-family housing stock in 2016 was rented, up from 13.5 percent a decade ago — but that’s not nearly sufficient to meet the rising demand.
House rentals are becoming more popular because many would-be homebuyers don’t have sufficient funds to buy. A 20 percent down payment on the typical home costs more than two-thirds of the median household income, and can cost even more in hot markets like San Jose, CA, according to Zillow.
“When the market crashed, many families lost homes they owned during the foreclosure crisis, and now may not be able to afford to buy another as home prices rise,” Zillow Chief Economist Dr. Svenja Gudell says in the report.
Additionally, many renters just want the increased space that renting a single-home provides.
But not all generational groups are equally as likely to rent a house. Some 40 percent of Gen Xers renters choose to rent a house, compared to 25 percent of Millennials and 10 percent of Silent Generation renters, says Zillow.
Millennials and Silent Generation renters are more likely to be apartment renters compared to Gen Xers. Half of all Millennial renters and 62 percent of Silent Generation renters are apartment renters.
“Even though rental homes are in high demand, apartment living remains an attractive option for many young renters who want to be close to work and amenities, like restaurants and grocery stores,” Gudell says in the report.
Almost half of all renters in the US have considered renting a house instead of an apartment, but less than one-third of renters actually do.
And although demand for rental homes is very high, supply remains exceptionally tight.
“A lack of available land around already built out cities driving high land costs, the high cost of skilled labor, which remains scarce even years into the recovery, and even the lengthy and costly approval/permitting process due to land use regulations have crippled single-family home construction,” Zillow Senior Economist Skylar Olsen tells BuzzBuzzNews.
Inventory challenges should continue to drive prices upwards in the coming months.
“The growth in rents for single-family homes has outpaced rent appreciation for apartments, and that should continue. We expect rents overall to grow about 2 percent over the next year, so single-family home rents will probably grow a bit more than that,” Olsen says.
Click here to read the entire report.