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More new homes being built for renters

Published: Wednesday, Nov. 6 2013 9:00 a.m. MST

A sign lists a house that is for rent or for sale in Portland, Ore. Homeownership rates have been on the decline for years, according to Census Bureau data. (Rick Bowmer, Associated Press) A sign lists a house that is for rent or for sale in Portland, Ore. Homeownership rates have been on the decline for years, according to Census Bureau data. (Rick Bowmer, Associated Press)

Who do you build new homes for if fewer people want to own their own homes?

Renters.

Homeownership rates have been on the decline for years, according to Census Bureau data. Third-quarter homeownership rates for 2013 are at 65.3 percent — down from 69 percent in 2006.

Conor Dougherty in the Wall Street Journal explains: "Until recently, real-estate investors had focused primarily on scooping up tens of thousands of foreclosed homes, at a sharp discount, and converting them into rental properties. Now that the pool of these properties has declined and prices have risen, these investors are snapping up newly finished single-family homes to be used as rentals, or even developing vacant lots from the ground up."

The National Association of Homebuilders says builder confidence in the market for newly built, single-family homes fell in October.

"A spike in mortgage interest rates along with the paralysis in Washington that led to the government shutdown and uncertainty regarding the nation's debt limit have caused builders and consumers to take pause," says NAHB Chief Economist David Crowe in a statement. "However, interest rates remain near historic lows and we don't expect the level of rates to have a major impact on sales and starts going forward."

The Wall Street Journals says, using NAHB data, 5.8 percent of single-family homes started in 2012 were to be used as rentals — up from 4.8 in 2011.

Nin-Hai Tseng in CNNMoney says that homebuilding is on the upswing: "They're building more, they're hiring more workers, they're building bigger houses. Still, some things haven't changed: Renters (as opposed to buyers) are still driving the rebound of the residential construction industry."

Meaning, that in addition to more single-family homes being built for renters, multi-family home building is booming.

"Construction of multi-family homes, typically destined for the rental market, make up about 33 percent of all residential construction today," Tseng writes. "That's markedly higher than the average of nearly 20 percent over the past two decades."

Until the housing market improves, builders will continue to focus on renters, Tseng writes.

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