By Steve Harper and Elizabeth Beasley, Apartment Guide contributor
Renting — while never really out of style — is trendy again!
The National Association of Home Builders predicts that a preference for renting among young people is driving the building of many more new apartment buildings in the next couple of years. The state of the housing market, among other factors, seems to be leading more people to choose renting in the near future.
Are you ready for a reality check on the state of renting?
Housing trends work hand-in-hand with renting trends, of course. As reported in Forbes, there should be more supply and demand for urban apartments this year. Trulia’s Chief Economist Jed Kolko indicates that, because families are starting to buy homes again, single-family rentals — typically suburban — will be less in demand, accompanied by a rise in rentals in the heart of a city. These urban rentals will be occupied mostly by young adults who are moving out of their parents’ homes, starting careers and renting apartments close to work downtown.
If you are looking for a place in the city, you might run into some competition — or a lot of new friends, depending on how you look at it!
High demand means lower affordability
The good news is that comfortable, convenient apartments in cities are on the rise. The bad news: these apartments are becoming more expensive.
Multifamily Executive cites a Harvard report pointing out that demand for rentals is increasing, allowing prices to go up. Downsized incomes are creating slimmer budget margins for many renters. Currently, the average renter is spending somewhere between 30 and 50 percent of his or her income on rent, the report indicates.
Staying aware of lesser affordability is a good thing, so you can make the most of your housing dollar. Aim for paying 30 percent, or less, of your paycheck, and you’ll be better able to stay in budget as rents increase over time.
Second-tier cities are tops
For years, the top rental markets were the cities that never sleep, like New York, San Francisco, and Washington, D.C. But 2014 real estate trends show that smaller, savvy cities are becoming popular with real estate developers and investors. Think Portland, Dallas, Austin, San Jose and Houston. Wherever you find startups and new industries thriving, you’ll likely find a second-tier rental market that’s booming.
Move over, Millennials
Here’s one of the more surprising projections. Baby Boomers will begin to surpass Millennials in the rental market.
Of course, young adults still account for a large chunk of the renting population. According to renting rates revealed by the 2013 Current Population Survey, 25-34-year-olds will likely make up 31 percent of rental growth over the next ten years. But did you know that renters aged 65 and older might well make up a whopping 52 percent of growth for the same time period?
To understand the findings of this research conducted by the National Multi Housing Council, consider that the sheer size of the Boom generation means that there are more people potentially making a life transition from home ownership to renting — many downsizing to seek an adventurous retirement in the city, rather than the suburbs. There are only slightly more Millennials than Baby Boomers in the U.S. today, but there will be more people over the age of 65 who may, if trends hold, become renters over the next ten years.
While it can be argued that living side by side is a great way for the two generations to grow wise and stay youthful together, this represents a potentially significant change in the rental landscape, nonetheless.
For more on renting trends, take a look at these topical posts:
Photo credit: Shutterstock / arek_malang