There has been a very strong trend of shifting from home ownership to renting over the last decade. This is a dramatic reversal from the peak reached in the 2000s where home ownership reached a historical apex.
Renter nation galore
There has been a big shift from home ownership to renting and this trend started at the apex of the last housing bubble. In the past, big money focused on apartments for rents versus single family homes to leverage economies of scale (i.e., one property manager, one roof, one area, etc). This trend of big money buying single family homes for rentals for a sustained amount of time (since 2008) is rather new.
The trend is rather clear here. We hit an apex early in the 2000s and then the shift started as more households were unable to buy in spite of every imaginable toxic mortgage product you can think of.
This trend of renting versus buying is actually a new one looking at historical data.
Every decade going back to the 1950s saw a lopsided win between buying versus renting. This trend held steady all the way until the 2000s. What is interesting is that we can argue that in the 2000s, this was the easiest time to purchase a home given there was no need to substantiate income, had the ability to go 100 percent LTV (and higher on some products with costs rolled into the loan balance), and simply needed a pulse to buy.
The young and the homeless
In California alone, you have 2.3 million adults shacking up with parents. No, we are not suddenly becoming Italy but simply put, people can’t afford to buy or even rent in most cases.
It is no coincidence that the peak of home ownership for the young coincided with the peak home ownership rate overall. Younger households took the brunt of the housing bubble. They had lower incomes and went into deeper leverage to purchase. They probably were also more junior in their careers and did not have a war chest to weather an economic hiccup.
What is also fascinating is that since the market crashed, big money investors have purchased a large share of single family homes to convert to rentals. The trend is rather clear.
California has one of the highest share of single family homes for rent as a percentage of all single family homes available. It is no surprise this has happened in states that took a front hit by the foreclosure crisis. A large percentage of buying since 2008 has gone to investors, many with the idea of turning these places into rentals.
Starting in the middle of 2013, there was a clear shift that investors were pulling back from the single family home market. Because of this, we have seen inventory rise: