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Is America becoming a nation of renters?

By Catholic Online (NEWS CONSORTIUM)
December 27th, 2011
Catholic Online (www.catholic.org)

In an otherwise stagnant U.S. economy, some segments of the construction industry are enjoying a boom. In some areas, the construction of new apartment complexes has become commonplace. This reflects a trend among many Americans who have discarded the notion of ever owning their own home, and now prefers renting apartments.

LOS ANGELES, CA (Catholic Online) - "We're seeing overall work come back and there's a backlog of contracts to go through," Eric Keith, director of urban design and planning at JHP Architecture says. "There's strong interest in multi-family units and plenty of pent-up demand."

The percentage of Americans homeowners dropped from a peak of 69.2 percent in late 2004 to a 13-year low of 65.9 percent in the second quarter, edging up to 66.3 percent in the third quarter of this year.

In the rental industry, the percentage of rental properties that are empty fell to 9.8 percent in the third quarter from 10.3 percent a year earlier.

Unemployment remains lodged at 8.6 percent, and with home foreclosures rising and property prices under pressure, more Americans are opting to rent, a shift that is changing the face of the U.S. housing industry.

Oliver Chang, an analyst at Morgan Stanley has dubbed 2012 "The Year of the Landlord." "Rents are rising, vacancies are falling, household formations are growing and rental supply is limited," the Morgan Stanley report stated. "We believe the demand for rental properties will continue to grow."

While new housing jumped 9.3 percent in November to the highest level in 19 months, those gains were almost solely in multifamily housing. Groundbreaking for structures with five or more units shot up more than 30 percent from October to now stand at nearly double the year-ago level.

Steve Blitz, senior economist at ITG Investment Research, argues that the next "boom" in residential construction has already started.

"The reason rents were rising is that through the past 15 years there has been an under-building of rental properties because typical renters were increasingly able to garner cheap financing to buy a house," he wrote in a research note.

It's not yet known what the pick-up in homebuilding will mean for the economy as a whole.

"Residential construction will be a plus to GDP in 2012, but house price declines will be a negative. So net, net housing will be neutral or a small drag on the economy," Mark Zandi, chief economist at Moody's Analytics says.

U.S. housing starts in April 2009 hit their lowest level on records dating to January 1959. While multifamily starts have given them a lift, 2011 may be the weakest year ever for construction of single-family homes.

© 2011, Catholic Online. Distributed by NEWS CONSORTIUM.