Rental houses have been in high demand since the housing market crashed, but a lack of supply has made renting those homes more expensive, according to a new Zillow® analysis released Tuesday.
While rents for both houses and apartments have slowed significantly over the past year, median rent for houses rose 1.3% annually to a monthly rent payment of $1,404, but median rent for apartments rose 0.5%, to a monthly rent payment of $1,551.
There are fewer single-family homes to rent than a decade ago. When the housing market crashed, investors scooped up many single-family homes lost to foreclosure and turned them into rentals. Almost 20% of all single-family homes across the U.S. were rented in 2016, up from 13.5% 10 years prior.
Meanwhile, rentals are in increasingly high demand because many aspiring homeowners don't have enough money to buy a home. A 20% down payment on a typical U.S. home costs more than two-thirds of the median household income, but can cost up to 180% of the median household income in pricier housing markets like San Jose and Los Angeles.
According to the 2017 Zillow Group Consumer Housing Trends Report (ZGR) coming out this fall, 45% of all recent renters consider renting a single-family home, but just 28 percent actually ended up renting one. The report also found that half of all buyers with children at home consider renting instead of buying during their home search, and according to the Census Bureau, 40% of families with children still living at home are renters.
In half of the 50 largest U.S. metros, median rent for houses is rising faster than median rent for apartments. The most extreme example of this trend is in Portland, Ore., New Orleans and Chicago. In Portland, monthly rent for houses is rising at almost 4.5% annually, but monthly rent for apartments is falling. Over the past year, median rent for Portland apartments fell just over 1%, to a monthly payment of $1,536. Median rent for Chicago apartments is also falling, while rent for houses is rising just over 1% annually.
"When the market crashed, many families lost homes they owned during the foreclosure crisis, and now may not be able to afford to buy another as home prices rise," said Zillow Chief Economist Dr. Svenja Gudell. "Those who want to buy are finding it difficult to find the right one, or may need a bit more time to come up with a down payment, but still want the advantage of space that single-family residences often provide. This, coupled with the foreclosure crisis turning millions of homeowners into renters, is a big reason why demand for single-family rental homes has risen over the last few years. Even though rental homes are in high demand, apartment living remains an attractive option for many young renters who want to be close to work and amenities, like restaurants and grocery stores."
Generation X renters (ages 38-52) are significantly more likely to rent a single-family home than any other home type. Just over 40% of Generation X renters rent a single-family home, compared to 25% of millennials (ages 18-37) and just 10% of Silent Generation renters (ages 73 and over).
Single-family rental homes are a popular choice among Generation X, but millennial and Silent Generation renters are more apt to rent an apartment. More than 50% of millennials and 62% of Silent Generation renters surveyed in Zillow's 2017 Consumer Housing Trends Report currently rent an apartment.