Over the past several years, the housing market has proven challenging and unpredictable as buyers, sellers, and renters found themselves at the whim of a global pandemic. This period of low-interest rates coupled with skyrocketing demand for single-family homes as people sought more space laid bare just how depleted U.S. inventory remained following the 2008 financial crisis. Now, as interest rates have risen and inflation persists, the housing market has shifted again. Buying a home has become more expensive, especially for first-time homebuyers that rely on financing, and renting often provides a quality and more affordable option.
The average 30-year fixed mortgage rate as of January 12, 2023, was 6.33% compared to 3.45% roughly a year ago, according to Freddie Mac . And as mortgage rates have increased, home prices have hovered around historic highs, culminating in a disconcerting environment for buyers as a possible recession looms. These factors have led an increasing number of individuals to pursue renting as a more affordable option.
As reported by the Wall Street Journal , a 30-year-fixed mortgage with 5% down (including principal, interest, taxes, insurance and maintenance) on an entry-level single-family home cost $3,058 a month, while the median monthly rent on such a house was $2,170, based on John Burns research. This is a difference of $888 a month—no small sum for most Americans. Moreover, banks have tightened requirements for obtaining loans , and renting offers flexibility and worry-free amenities and service that traditional homeownership does not.
The principal underlying element that’s complicating today’s market is a persistent lack of inventory in single-family homes. A 2021 estimate by Freddie Mac put the housing supply deficit at 3.8 million units. A more recent number from Mark Zandi, the chief economist of Moody's Analytics, estimates the shortfall is closer to 1.6 million homes . While an exact figure is hard to determine, it’s clear that the pipeline for bringing new single-family homes to market is not at the level needed to meet demand, with the National Association of Home Builders anticipating that singlefamily home starts will fall by another 15 to 20 percent in 2023 before beginning to rebound in 2024.
As we look at the year ahead, industry experts project stagnation at the start with mortgage rates and home prices holding steady. This means that renting will likely continue to be a valuable option for many as we face economic uncertainty and navigate a tumultuous housing market. The increasing popularity of single-family rental homes as a product has helped the industry advance its product and service offerings and better serve residents, while positioning leaders to meet demand.
A growing number of Americans are also turning to renting independent of our current environment. These include individuals that prefer the flexibility of a lease, remain part of the remote workforce post COVID-19 pandemic, or are in a transitory period of life. Leading single-family rental home companies, including Invitation Homes, will be there to help individuals find a place they can call home no matter the circumstance.
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