Rental Housing Gains As Homeownership Dips: Freddie Mac

The rental market is one bright spot in an otherwise dismal housing industry with U.S. homeownership falling about 1.5 percent over the past year, according to a new study from Freddie Mac.
Over the year ending mid-2011, the Census Bureau reported a net increase of 1.4 million households that moved into rental housing, a 4 percent rise in the number of tenant households in just one year.
Despite persistently low housing prices and record low interest rates, homeownership fell from 66.9 percent to 65.9 percent during the second quarter of 2011, according to the U.S. Economic and Housing Market Outlook for October from Freddie Mac, one of the two mortgage-financing giants under U.S. control since the height of the financial crisis three years ago.
Some of the shift toward rental housing can be attributed to financially stressed households facing short sales for foreclosures. But much of the rental demand is coming from “young and newly-formed households who have decided to
postpone homeownership in favor of renting during unsettled economic times,” reads the study.
Homeownership rates have fallen by 4.4 percent (to 21.9 percent) for those under 25 years of age, and by 7.0 percent (to 34.7 percent) for those aged 25 to 29 years.
The move of households toward rentals, combined with the limited new supply of rental units, has pushed apartment vacancy rates lower, the study said.
The Census Bureau reported that rental vacancy rates in buildings with at least five dwellings had fallen by 10 percent during the second quarter, the lowest rate in more than five years.
As a result, apartment rents, which had been flat to falling in many projects during the 2008-2009 recession, have begun to rise slowly. New construction starts of apartments,  in buildings with at least 20 dwellings, has picked up this year — in the second quarter, new construction was the highest since the end of 2008.
“New construction starts are slowly picking up and multifamily lending appears to be rising as well with this year’s origination volume stronger than 2010’s,” said Frank Nothaft, Freddie Mac’s vice president and chief economist. “In part, the rise in originations is related to the low-level of mortgage rates, improving apartment-sector economics, and the return of traditional lenders that had curtailed activity during the recession.”

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