The demand for renting is likely to increase dramatically during the next decade, according to the Bipartisan Policy Center, leaving questions as to how that will affect the recently recovering housing market.
“There is clearly an unmet demand for homeownership among young households,” Barry Zigas, director of Housing Policy for Consumer Federation of America, said in a HousingWire article. “Those households are running up against a number of constraints.”
The Bipartisan Policy Center projects that there will be five million to six million new rental households created in the next 10 years. This increase in renting demand is already being seen as younger adults are having a harder time find jobs out of college in today’s economy. More and more young adults are opting to stay at home with their parents rather than renting their own place in the midst of an unstable employment market. When the job scene does level out, a majority of these college grads will be likely to rent first rather than buy.
Another factor pushing people toward renting is the higher credit and mortgage standards required in the wake of the housing crisis. Lenders are requiring much larger down payments, higher credit scores and even higher buyer income.
“Credit for homeownership borrowing will likely be tighter and potentially more expensive, relative to earlier times,” Zigas said. “Families will likely have less wealth because the rising generation is starting with less wealth. If down payments are at any significant level, it will be a barrier to acquiring a home for longer than may have been the case in the past.”
Other contributing factors include things like the large number of consumers who lost their homes to foreclosure in the past several years. These potential buyers will have to rent or a few years at least until they can repair their credit. Changing senior needs will also increase the number of renters. With the aging baby boomer population, many seniors are now or will be soon looking to downsize their homes. Yet without enough of a potential buyer pool, many seniors may be forced to rent out their homes, instead of selling.