Thinking of buying or renting? Chances are you’re going to chose to rent a home, despite a market with average rents seeing a mostly unrelenting uptrend over the past two decades.
Meanwhile, owning a home is a dream that’s further out of reach for more Americans.
At the end of April, the U.S. Commerce Department reported that the homeownership rate in the first three months of this year was at 63.5 percent, not seasonally adjusted. That’s down from 63.8 percent in the fourth quarter of 2015. And that is very close to its 48-year low of 63.5 percent in the second quarter of 2015.
The flip-side of this trend is the growing number of renter households. About 363,000 new renter households were formed in the first quarter of 2016, compared with the same time last year. That’s about twice as many as the 177,000 newly owned households.
In the first quarter 2016, the median asking rent for vacant for rent units was $870. The chart below from the Commerce Department shows the persistent rise in median asking rent over the past two decades.
According to Zillow, the typical new homebuyer in his early 30s rents for 6 years before making his first home purchase. That’s up from 2.6 years in 1970′s. Zillow also reports that theinventory of entry-level homes is down 10 percent in the first quarter, compared to last year. That has fueled a faster jump in home prices in this category in more than half of the largest U.S. markets.
All of these factors are making it more difficult for about 80 percent of renters who have a desire to own a home.
The U.S. is increasingly a nation of renters, with the share of rental households at a 20-year high, a recent Harvard study found. Many renters just can’t afford to buy a house and have little to no choice but to rent. And it’s not just the younger age groups, such as Millennials, that are shunning homeownership. Baby boomers nearing or entering retirement are seeing homeownership as a liability.
“We’re seeing in many new apartment communities that a large percentage (of tenants) have been baby boomers who are moving out of a large home or moving away from home ownership,” said Joseph Beaudoin, a Tampa broker with Cushman & Wakefield, told the Tampa Bay Times.