According to a new study by Freddie Mac, renters are not particularly likely to make a move toward homeownership despite rising rental rates on the horizon. David Brickman, EVP of Freddie Mac Multifamily, said, “We’ve found rising rents do not appear to be playing a significant role in motivating renters to buy a home.” He added, “This contradicts what some in the housing market think as they expect more renters ought to be actively looking to purchase a home.” Brickman went on to say that Freddie Mac analysts believe that rents are rising because rental demand is rising, not because home purchase volumes are on the rise.
If Brickman is right, the demand for additional rental options will also continue to grow in today’s market. At this point in time, more than a third of all U.S. households are presently in rental homes. Furthermore, Brickman reported that about 440,000 new apartment units are needed in order to keep up with demand – despite an increase of 3.6 percent in rental rates over the course of 2014 and a projected 3.4 percent increase in 2015.
Renters told Freddie Mac researchers that they want to own their own homes but are not likely to buy in the near future. 70 percent said they would like to buy but cannot afford it. 51 percent reported that they had planned to buy but have now delayed their plans. National Association of Realtors (NAR) economist Lawrence Yun noted that rising rental prices could further delay home purchases. “With rents taking up a larger chunk of household incomes, it’s difficult for first-time buyers…to save up for an adequate down payment,” he said.
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