US Shift from Home-Owning to Renting Reviving Market
17 August 2011
Last week we had a report from the investment management organisation the Canada Pension Plan Investment Board (CPPIB) that the switch away from the American dream of home-buying to acceptance of renting would be a revitalising force in the US housing market, and this week we have apparently the first signs of confirmation of this.
The CPPIB statements came after they announced investments in apartment buildings in Boston, Los Angeles, San Jose, Seattle and Washington, D.C, worth over $300 million, as well as JVs on multi-family developments in Massachusetts and Virginia. Now the US Commerce Department tells us that while housing starts slipped 1.5% to 604,000 units in July, starts on multifamily housing -- rental apartment developments etc -- rose 7.8 percent to 179,000 units.
In case you are in any doubt this is representative of the shift away from home-ownership to renting. In the second quarter of this year US home ownership fell to its lowest level since the first quarter of 1998 according to the U.S. Census Bureau. This is down from a peak of 69.2% reached in late 2004. And according to many analysts the change is gaining momentum.
"Even in cases where it might make more financial sense -- or it might actually be cheaper on a monthly basis to own a home rather to rent one, a lot of people are not making that purchase," said Oliver Chang, head of U.S. housing strategy at Morgan Stanley.
"The trend that we're on is going to continue," he added.