Friday, July 24, 2015

Rental Market Continues to BOOM

The Joint Center for Housing Studies of Harvard University recently released a report called “The State of the Nation’s Housing 2015.” You can view the report here. This type of report has been released by Harvard since 1988. The goal of these reports is to provide a current assessment of the state of the rental and homeownership markets; the economic and demographic trends driving housing demand; the state of mortgage finance; and ongoing housing affordability challenges.

Here are a few Key Facts from the report:

  • · The share of US households that rent their housing rose to a 20-year high of 35.5 percent in 2014, marking the 10th consecutive year of robust renter household growth.
  • · Households in the top half of the income distribution contributed 43 percent of the growth in renters.
  • · While single persons still make up the largest share of renter households, the numbers of renters of all family types rose over the decade.
  • · Single family homes housed more than half of the growth in renters in 2004–2013.
  • · The national rental vacancy rate dipped to 7.6 percent in 2014, its lowest point in nearly 20 years.
  • · Rents rose at a 3.2 percent rate last year—twice the pace of overall inflation.
  • · Rental growth is likely to remain strong as members of the huge millennial population enter the housing market.
  • · In 2015–25, the typical millennial will move from the 20–24 year-old age group (where just one in every four persons has formed an independent household) to the 30–34 year-old age group (where half of the population lives independently).
  • · At more than 86 million, the number of people that comprise the millennial generation has already exceeded that of the baby boomers at similar ages and will increase over the next 20 years as immigration (typically of young adults) continues to pick up.
  • · By 2035, given headship rates similar to those of previous generations, the millennials (born 1985-2004) are expected to form more than 30 million new households.
  • · The Joint Center for Housing Studies projects that demographics will support baseline household growth of just under 1.2 million annually in 2015–25, with the millennial generation driving much of this growth.
This information is based on national data. The rental market has been even stronger here in the Portland-metro area as rents have rose over 20% in the last 5 years alon­­­­e.

Right now would be a great time to purchase a rental property as rents are expected to increase at a pace above inflation.  This will make it easier to generate positive cash flow.  Also, the strong rental demand has lowered vacancy rates which means it is easier to find new tenants quickly.  These factors make it a favorable market for investment property owners as they can hike rents and find new tenants quickly.  Another great reason investment properties are a great buy right now is because of above average home appreciation which Oregon has been witnessing the last couple years. 

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