The State of Renting: ‘Realty’ Check 2014

If your instinct is that the rent is, well, “too damn high,” check out some possible reasons why!

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?

Urban upswing
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:

Which Cities Will See the Greatest Rent Increase in 2014?

What’s the Most Expensive Town in the U.S.? The Answer May Surprise You

Americans on the Move: Latest Census Discoveries

Apartment Guide’s Top 9 Decor Trends for 2014

The Rent vs. Buy Debate: Gen Y Weighs In

5 Economic Factors that Favor the Perma-Renter

Photo credit: Shutterstock / arek_malang

One thought on “The State of Renting: ‘Realty’ Check 2014

  1. “preference for renting among young people is driving the building of many more new apartment buildings” but “Baby Boomers will begin to surpass Millennials in the rental market.” I find that an odd finding.

    I think the problem (at least in my area in Denver) is no one seems willing to invest in, or build truly “affordable” housing. Sure, they are being built and refurbished at a good pace. However, property managers are trying to attract this younger professional set by creating swanky high rise units and adding tons of amenities and features. Mostly this is to justify charging ridiculously high rent for them (some mirroring what a monthly mortgage would be). The boomers (as they retire) are going to find it tough to afford these, if they don’t already.

    I am 50 years old and feel I have been priced out of the current market. I work full time (making $12.50 hour) and another part time job (wage $8 hour). I fairly recently was not accepted for a small $695/mo STUDIO for Pete’s sake because I didn’t quite make ithat “take home salary must be at least 3x rent” rule. It is also hard to come up with the huge security deposits, pet deposit (cat) , application and “admin” fees they charge all up front. I share a house and live in a basement apartment with housemates presently. Would love to live out on my own again when my lease is up there but this forecast is not encouraging that I will be able to do that very soon at all. Due to past issues, my credit is not good at all or I would be buying my own condo for sure.

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