American Dream Deferred: Demand for Family-Sized Rentals Balloons
When Kimberly Moser and her family moved to Anthem six years ago, they weren’t ready to purchase a home. “We didn’t know how long we would be here, and along with a lot of families, we had suffered credit-wise due to the market a few years before,” Moser said. Now she, her mother, her husband and three kids are in their second rental home in the community. Their story is typical.
Over the past decade, in the fallout of the housing crisis, a growing number of parents with kids at home are living in rentals instead of owning their homes.
The shift, whether a temporary or permanent deferring of the classic American Dream of homeownership, has been driven by numerous factors, including: Large numbers of lower-cost homes have been scooped up by investors and turned into rentals; and home prices are rising faster than wages, creating an affordability gap that hits first-time homebuyers particularly hard.
In the Phoenix Metro Area, the number of renter families with children grew by 70,000, or 42 percent, over the past decade, while the number of homeowner families dropped by 12 percent, according to a recent analysis by RentCafe.
The shift has lifted demand for family-sized rental housing. Between 2006 and 2016, 55 percent of the apartments built in the metro area were family-sized units with two to four bedrooms, RentCafe found.
Nationwide, the number of families who own their homes decreased by almost 3.6 million from 2006 to 2016, and the number of families with kids living in rentals increased by 1.9 million, according to the U.S. Census Bureau.
Most Americans don’t see things getting any easier for potential homebuyers. In the latest quarterly survey by the National Association of Realtors, 73 percent of 2,700 people interviewed across the country think it will be harder for future generations to become homeowners.
Meanwhile, rental rates are climbing faster in Phoenix than the national average. Zillow says rents in the Phoenix Metro Area had been rising at about 4 percent year-over-year, but in July the increased slowed to 1.7 percent, with median rent hitting $1,362. Nationwide, rents rose 0.5 percent year-over-year in July to $1,440. Rents for single-family homes (excluding apartments) jumped 5.5 percent in April compared to the year prior, according to the property data firm CoreLogic.
And prices of existing homes continue a years-long upward trend. The median home value in July across the Phoenix Metro area was $256,000, up 7.7 percent over the past year, Zillow reported, adding that there are 8.6 percent fewer homes on the market in the metro area compared to a year ago. Prices have continued rising, with inventories shrinking.
The situation is similar across NoPho, the I-17 corridor from Norterra to New River, where the inventory of existing homes for sale became tighter in July and prices continue to climb. Inventory was particularly low in Anthem Parkside and the Norterra area at the end of July, according to the latest analysis by North Phoenix News and In&Out Magazine [See “Tight Housing Market Gets Even Tighter,” In&Out, Aug. 23].
For some, renting a house is simply the smart first step, regardless of finances. “We are brand new to Arizona and renting allows us to get to know the area better before we invest in our own home,” said Anthem resident Tina Gilbert.
Yet the broad shift from owning to renting is both fueled by, and continues to fuel, the widespread purchase of single-family homes by investors large and small, who then turn them into rental properties, effectively taking them off the existing home-sales market for extended periods.
The concept gained steam during the housing bust, with many foreclosures on the market awaiting cash buyers. It hasn’t let up. In fact, last month, a company that bills itself as the largest private owner of single-family rentals in the nation announced it just raised more than $1 billion to expand purchases and operations. The company, Pretium, owns and manages more than 26,000 homes in 15 markets, including Phoenix.
Investors frequently pay cash for lower-cost homes, directly competing with families who may struggle to scrape together a 20-percent down payment and may have loan contingencies that frighten sellers.
For some, renting is still a path to that dream of homeownership.
“We rented for three years, then the owner gave us an offer to buy,” said Anthem resident Aaron Temple. “We are now homeowners and didn’t have to move.”
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