The growth of renters in the residential market is exponential. A study conducted by Pew Research found that there are more renters now than at any other point in the last 50 years.
Rising home prices, budget-busting down payment rates, fear of another market crash and student debt are a few factors that have led consumers to rent. On average, only 45% of renters can afford mortgage payments on median-priced homes in their areas.
According to Forbes.com, in an article about student loan debt “the average sum a student repays at the end of his or her education is increasing.” In 2003, studies indicated that most graduates left school with loans between $10,000 and $15,000. However, in 2012, that average increased to $20,000 and $22,000. This means that recent graduates are leaving with more debt than graduates from previous years. This is a factor in why more people are being turned down for a first-time home loan- thus, landlords can benefit from consumer demand in affordable rental housing.
Also according to the Pew study, between 2006 and 2016 the number of renters in the U.S. grew by 7.6 million, however, due to the housing crisis the number of households who owned remained relatively constant. This led to homeowners opting to use their property as a source of income and put it on the market to rent.
Renters’ demographics have shifted as well:
- The most likely of all age groups to rent are adults under 35 years old
- In 2016, 65% of heads of households’ younger than 35 were renting, an 8% increase from 2006
- More adults in the age range from 35 to 44 are renting: In 2016, approximately 41% of all households rented, a 10% spike from 2006
- In 2016, 28% of heads of households aged 45 to 64 were renting, a 6% increase from 2006
These interesting statistics are valuable for all landlords to be aware of as it can greatly impact their bottom line positively and negatively. This will affect how landlords market to millennials and how possibly how they evaluate debt to income ratios of their potential renters in the future. Landlords should adjust their marketing plans accordingly.
Landlords may want to consider taking a closer look at debt to income ratios when evaluating the financial security of a tenant. In addition to keeping up with industry trends landlords and developers should be prepared for an increase in occupancy and renewals because of this shift in the rental market.
Contact us today to find out how you can automate and speed up the screening of rental applicants.
Sources: Forbes.com and Pewresearch.org and Marketwatch.com