A new survey by Freddie Mac finds that soaring rents are not turning renters into homeowners, but actually delaying homeownership for many.
Of those who experienced a rent increase in the past two years, 70 percent would like to buy a home but cannot afford to at this point. Half (51 percent) said that they now have to put off their plans to purchase a home. Some 44 percent indicated they’d like to buy a home and have started looking.
“We’ve found that rising rents do not appear to be playing a significant role in motivating renters to buy a home,” said David Brickman, EVP of Freddie Mac Multifamily. “This contradicts what some in the housing market think as they expect more renters ought to be actively looking to purchase a home. We believe rising rents are primarily a sign dsof increased demand rather than a signal that home purchases will be increasing.”
Brickman added, “Growth in the number of renter households is occurring amid an improving job market and economy. The demand for rental housing is increasing and an estimated 440,000 new apartment units are needed each year to keep up with demand.”
Rents rose 3.6 percent in 2014 and are expected to rise 3.4 percent above inflation this year. More than one-third of U.S. households now rent their homes, and renters account for all net new household growth over the last several years, according to the U.S. Census Bureau.
More than a third (38 percent) of renters who have lived in their home two years or more experienced a rent increase in the last two years, while 6 percent experienced a decrease.
A third of renters in the survey are very satisfied with their rental experience and another 30 percent indicate they are moderately satisfied. The top favorable factors about renting are freedom from home maintenance, more flexibility over where you live and protection against declines in home prices.
Moreover, the results show some shared positive views across generations with no significant differences between Millennial, Generation X or Baby Boomer renters in their views that renting provides flexibility over where you live and protection against home price decline.
Despite increases to their rent, 53 percent say they are making no changes to their spending plans and 46 percent say they like where they live and will stay in their current place.
Among renters making adjustments due to increases in their rent, 61 percent indicate they are spending less on essentials or nonessentials, 28 percent are contemplating getting a roommate or moving into a smaller rental property (28 percent). Three in ten (31 percent) renters whose rent increased in the past two years agreed that they like where they live, but can no longer afford the rent.