11-27-19

Low Rental Supply

Have you noticed how monthly rental rates for homes have been going up? Have you wondered what is driving these price increases and how you can benefit from this trend? Just read on, we have prepared some interesting data for you. 

Low Rental Supply is Pushing Up Rents

More and more Americans find it harder to afford their own home. Instead, they have been searching for rental homes, especially single-family rental units. Demand for available rental units remains high, while supply of rentals is shrinking. Consequently, prices for rentals have been pushed up. Since the first quarter of 2010, the US national rental vacancy rate has dropped from 10.6% to only 6.8% in third quarter of 2019. That is a drop of 36% percent in the rental vacancy rate over the past decade. Simultaneously, the median asking rent across the US increased from $685 to $1,002 per month or by 46%. See chart Rental Vacancy Rates and Median Asking Rent for details. 

Rents for lower-priced homes increased faster

U.S. single-family rents increased 3% year over year in September 2019, the same rate of increase seen in September 2018, according to the CoreLogic Single-Family Rent Index (SFRI). The index measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time. Single-family rents started climbing steadily in 2010, and have stabilized at around 3% annually since early 2019.

Using the SFRI to analyze specific rent tiers reveals that rents for lower-priced homes increased faster than those of higher-priced homes. This has been the case since mid-2014. Less expensive rentals (units that cost less than 75% of the median regional rent) nearly jumped 4% year over year at the end of September 2019. High-end rentals (units that cost more than 125% of the median regional rent), only increased by 2.9% year over year. See chart National Single-Family Rental Index for details. 

What’s driving people to rent?

Since 2010, when the worst part of the financial crisis was over, home ownership has declined from 67.1% to 64.8%. The difference between these proportions represents people who are now renters. This is due to rising home prices, higher lending rates, and a preference for flexibility.  Also, a new generation of home dwellers is more inclined to rent than to buy. According to Pew Research, the millennial generation, which accounts for roughly half of US households with children, is more likely to rent than own a home compared to previous generations.

You have the opportunity to participate in this lucrative rental market without any of the headaches that go along with being a landlord. As a first trust deed lender, you can support a developer who has fully renovated a rental property and is providing a rental unit to his community. Your investment is secured by a first lien position on a specific rental property of your choosing. The loan is never above 65% of the appraised value. Let us introduce you to a form of real estate investing that provides excellent security and a 9% rate of return.