One piece of the residential housing market that appears to be doing well is renting. Has there been a shift away from owning homes to renting them? N.C. State University economist Mike Walden weighs in.
“Indeed, there has. … The home ownership rate has fallen from a high of 69 percent before the recession — I should say that was an all-time historic high. It’s now down to 66 percent.
“At the same time the vacancy rate for rental units, which is a measure of how strong the rental market is, has gone from a high of 11 percent, down to 9 percent in the last couple of years.
“So the point here is that the home ownership market seems to be weakening, but the rental market seems to be strengthening. And I think this is a result of a couple of factors: One, it’s simply much harder for people who want to buy homes to get financing. So, in many cases there may be households out there who want to own, they just can’t. So, they continue to rent.
“But secondly I think there’s been a reassessment of how home ownership does as an investment. Clearly when home values were rising very rapidly as they were in the 1990s and the first half of the 2000s, people in part bought homes because they were a good investment. Now, unfortunately for homeowners, housing values on average have been going down over the last three to four years. That makes them less obviously as a good investment. And I think that’s caused some people to say, ‘You know, owning a home is simply not a good economic move right now, and we’re going to go ahead and rent.’
“Now, I do think that this will turn around. I do think that at some point in the future, I don’t know exactly when, home values will start to rise again — probably not to the levels that they did in the 1990s and early 2000s, in which case we may see some of this shift back from renting to home owning.”