Renter Households Are Growing Faster Than Homeowner Households: How You Can Capitalize on This Trend as a Future Homebuyer

10.01.2024 | Category: Article

The number of renter households in the U.S. has surged, growing three times faster than homeowner households, according to recent data from the U.S. Census Bureau analyzed by Redfin. While both groups hit all-time highs in the second quarter of 2024—with 45.2 million renter households and 86.3 million homeowner households—the growth rate for renters (1.9%) far outpaced that of homeowners (0.6%).

Why Are Renter Households Growing Faster?
The primary driver of this trend is the rising cost of homeownership. Over the past year, mortgage payments have increased by about 5%, while rents have risen only 1%, according to Redfin. In fact, mortgage payments are now nearly 90% higher than pre-pandemic levels, compared to a 23% increase in rents.

One key factor keeping rental prices more stable is the surge in new multifamily housing developments. In the second quarter of 2024, 563,000 new apartment units were added—one of the fastest rates in nearly three decades. This influx of rental units has helped balance the demand for housing, keeping rent increases moderate compared to skyrocketing home prices.

A Lesson in Housing Affordability
The housing market’s supply and demand imbalance is evident, especially in the homebuying sector. With fewer homes available, prices have continued to climb, making it harder for would-be buyers to enter the market. In contrast, the rapid construction of multifamily units has offered renters more options, helping to slow rent increases.

Experts believe the solution to rising home prices lies in expanding housing availability across the board. By increasing the supply of homes, prices may stabilize—offering relief to both renters and potential homeowners.

For those considering buying a home, understanding these trends is crucial. While homeownership remains a goal for many, it's important to consider current market conditions and evaluate whether renting might be the more affordable option in the short term.

How You Can Capitalize on This Trend as a Future Homebuyer
This shift highlights an important opportunity for potential homebuyers. As mortgage payments continue to rise, understanding how to navigate current market conditions can help you plan your homebuying journey wisely. Here are a few tips to help would-be homeowners make the most of these trends:

1. Take Advantage of Easing Competition
With fewer people buying homes due to high costs, competition in the housing market may ease. This could give you a better chance of securing a property at a fair price, especially in areas where the demand for rentals has risen faster than for homes. Stay alert to opportunities where sellers might be more willing to negotiate, especially if their home has been on the market for an extended period.

2. Watch for Stabilizing Prices in High-Rent Areas
In certain high-rent areas, more multifamily housing units are being built at record rates, helping to meet rental demand and keep rental costs relatively stable. This increase in rental supply could help ease the demand on home sales in those regions. Keep an eye on local markets where rental construction is booming, as home prices might not rise as quickly, giving you more time and options to buy.

3. Plan for Higher Mortgage Payments
While mortgage payments have risen by about 5% in the past year, the long-term benefits of homeownership still outweigh the short-term costs for many. If you’re serious about buying, focus on strategies to lock in a favorable mortgage rate. Consider speaking with a lender about different loan options, such as rate locks, adjustable-rate mortgages, or government-backed loans. These can help you manage rising payments and get into a home before rates increase further.

4. Build Your Savings and Credit Now
The current trend of slower growth in homeownership means more time for you to save for a down payment or improve your credit score. Take this opportunity to fine-tune your finances, which can make a significant difference when you apply for a mortgage. Having a larger down payment or better credit will give you more negotiating power and could lower your monthly payments.

5. Consider Long-Term Market Trends
While the cost of homebuying has outpaced rent growth recently, owning a home remains a solid long-term investment. Historically, home values appreciate over time, building equity and creating wealth. If you can afford the initial costs of buying a home, you stand to benefit from the long-term appreciation of property values, even if the market feels challenging right now.

Ready to Buy? Let Us Help
At Mutual of Omaha Mortgage, we understand that buying a home can feel overwhelming, especially in today’s market. Our experienced team can help you explore your options, plan for the future, and take advantage of the current market trends. Whether you’re a first-time homebuyer or looking to move up, we’re here to guide you through the process. Reach out today to learn more about how we can support you on your path to homeownership.