The home-ownership rate in the United States is decreasing. Therefore, more single-family will be utilized as rental. How is single-family housing impacting multifamily rental? So many homes are presently for sale, for rent or foreclosed it's hard to tell who's on first!
According to the website Calculated Risk quoting from Census Bureau data, since 2004 there are 3.60 million homes built for sale that are being utilized as rental.
As the home -ownership shrinks from 68% to perhaps as low as 63% over the next few years single-family homes will become a larger percentage of the rental marketplace. With price differentiation, that's fine. With a multitude of owners each having a single rental that's trouble. Let's review the sources of single-family property rental inventory that will soon compete directly with multifamily.
For Sale Housing
According to Reuters, the average days on market of "for sale" housing is over 900 days in New York (NY City excluded) and over 600 days in Florida.
Recent data from Trulia has the average Days on Market in Phoenix as 48 days. After 48 Days on Market homes in Phoenix, on average, are reduced in price by eight percent. Most notable is that 35% of for sale homes have had price cuts. Numbers are similar for Mesa, AZ, Minneapolis, MN and Long Beach, CA.
For Rent Housing
The number of single-family rentals cannot be ignored. In my view, in our current economy, this pending excess inventory represents several percentage points of occupancy that normally falls to multifamily. The number of for-sale homes turned into rentals will only grow as the home-ownership rate decreases. Whether because of economic uncertainty, the job market or reduced income, sentiment has changed towards home ownership.
Foreclosed Housing
There are over four million homes in foreclosure or serious delinquency in the United States. According to Professor Wheaton of MIT single-family foreclosures are concentrated in four states. They are California, Arizona, Nevada and Florida.
Eventually, these markets will clear- all of them. Of the for sale and foreclosed homes many will become rental. This will take years. Limited construction the last three years will assist in absorbing much of this inventory.
Consider, however, that as the home-ownership rate declines single-family will play a larger roll in the rental marketplace. Multifamily has a new competitor coming it's way with some volume. It's name is the single-family home.
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