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Rental Market: Where First-Time Buyers Hide

Rental is vastly healthier than ownership housing. But the rental outlook is not quite so rosy.

By Bill Lurz, Senior Editor, Business
May 4, 2009
Professional Builder

A year ago, we told you the rental market was poised for liftoff, pointing out that six of the 10 largest apartment builders built more units than the previous year, quite a contrast to the collapsing empires of the big single-family builders. The giants numbers are still much the same. Rental is vastly healthier than ownership housing. But the rental outlook is not quite so rosy. 

“The home ownership rate is dropping, which usually bodes well for rental,” says NAHB economist Dr. Bernie Markstein, “and there’s a lot of supply coming on line in the rental market, to meet demand as employment slowly begins to recover. The trouble is, that won’t happen for a while.” 

Markstein predicts 130,000 apartment starts this year and 126,000 in 2010. Part of the problem is that rental builders are having the same trouble as single-family builders getting financing, so production is likely to fall off once the projects now underway are completed. 

Job creation drives rental demand even more immediately than starter ownership housing. Even inclined to lend, lenders will be reluctant to commit to projects until recovery lights up the sky.

© 2009, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.

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