5 Factors that are Pushing the Demand for Rentals Sky High

Ever since the financial crisis of 2008, it seems like more and more people are less inclined to buy houses. This isn’t just an opinion, either; it’s a fact, with the numbers to back it up. According to a recent article in the Wall Street Journal, U.S. home ownership has declined to its lowest point in the last 50 years, while rentals have been increasing substantially.

While I could spout statistics about the booming rental industry all day long, I think it’s more important to investigate the factors that are driving it. I’m much more interested in the “why” than the “what”, and as a real estate investor, you should be too. The elements that are fueling the increase in rental demand are the very things that will determine your success as an investor, so it’s important to pay attention to them.

1. Economic and Job Growth - This is one the major defining factors of rental growth. Where there is a growing economy with available jobs, there are people. And all those people are looking for places to live. In line with current trends, many of them are in search of great rental properties. This can be seen right now in cities all across the U.S., with Kansas City, Nashville, and Austin standing out as some of the fastest-growing.
2. Relocation - It makes perfect sense that people moving from one place to another would drive the rental demand, doesn’t it? Migration of people, whether they’re moving from one neighborhood to another or to a new city entirely is another big reason for the spike in rentals. There are a lot of reasons for relocation, too - job opportunities, family changes, etc.
3. Household Formation - Household formation, or rather, the delay of household formation, is another driving force for renters. More and more often, young adults are delaying marriage and long-term relationships in favor of the single life, where they’re much more likely to rent rather than buy a home.
4. Rising Real Estate Costs - Right after the housing bubble burst, home prices were at a low. In the last several years, however, prices have crept back up in most major markets, making it increasingly difficult for people to purchase a house. Additionally, banks have become more stringent in their lending requirements, so it’s more of a challenge to secure a mortgage. The alternative to all this, of course, is renting, which is a more cost-effective choice for many people.
5. Lifestyle - Lifestyle choices also factor into the decision to rent versus buy. In recent years, urban growth has outpaced that of the suburbs, leading to an influx of people seeking rental properties in urban cores. Other lifestyle preferences also have an impact, including the convenience that comes with rentals (i.e., maintenance), shorter term options, and access to amenities.

Each of these is a critical component in the ever-increasing demand for rental homes and apartments. These are also factors that, as an investor, you should be keeping an eye on, as changes in them can impact your current and future rental properties. Pay attention, watch the trends, and make sure you’re evolving along with them - that’s how you find success as an investor.