That’s what 2011′s final score will be, according to Freddie Mac’s latest outlook for 2011, as vacancy rates shrivel and sales struggle to stay even with last year’s tax credit boom and bust.
With the Census Bureau reporting a net increase of 1.4 million households that moved into rental housing this year, or a 4 percent rise in the number of tenants, many in single family homes converted from ownership to rental. Some 800,000 new households formed in the U.S. this year and the number of homeowners has fallen bv 600,000 homeowners. A Reis Inc. survey of professionally managed buildings in metropolitan markets found vacancy rates stood at 5.9 percent during the same quarter, the lowest since 2007 for that class of apartment. Rates for the fastest growing segment of rentals, single family homes, are more difficult to pin down.
Calling the rental market “a bright spot” in the housing sector, Freddie Mac predicts this year will end with thud for home sales, with virtually the same number of sales as last year, 4.63 million. Freddie’s current 2011 sales total is the same estimate as last month, but its forecast for 2012 rose slightly from 4.80 to 4.90 million sales.
“Much of the rental demand is from young and newly formed households who have decided to postpone homeownership in favor of renting during unsettled economic times. Indeed, the decline in the homeownership rate has been sharpest for those household heads under 30 years of age: While the U.S. homeownership rate has fallen about 1.5 percent over the past year (from 66.9 percent to 65.9 percent during the second quarter of 2011), owner rates have fallen by 4.4 percent (to 21.9 percent) for those under 25 years of age and by 7.0 percent (to 34.7 percent) for those aged 25 to 29 years,” said the Frank Nothaft, Freddie’s chief economist.
“With rental demand rising and apartment economics improving, the multifamily sector is a positive signal for the U.S. housing industry,” Nothaft concluded.
Freddie’s negative signals for the housing industry can be found in its October forecast. It predicts the S&P Case Shiller Home Price Index will end the year down 3.7 percent, a point worse than last year, and prices next year will be even worse, falling an additional 4 percent, which would make 2012 the worst year for prices since the 18 percent price plunge of 2008.