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The combination of skyrocketing home prices and the rise in remote work that began during the COVID-19 pandemic has led to a major renewal in the US rental market as many US renters pack up and move to cheaper markets.
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According to new TransUnion report. Over the same period, rental applications in rural areas grew by 28%, while urban rental applications grew by only 10%. Rising housing costs and a dramatic increase in remote work have likely been the main drivers behind these shifts.
Interstate migration patterns show that more people (and tenants) are leaving the Rust Belt and the Northeast for the South Atlantic and mountain states, as well as Arizona and Texas.
The overall rent occupancy rate in the US reached a record 98% in January 2022. The rise was partly driven by an influx of Americans who sold their homes when home prices were at an all-time high and then decided to rent until valuations dropped. again.
An analysis of rental applications for 2020-2021 showed that the number of applicants who sold their homes during the past year increased by 37%, and the number of applicants with an outstanding mortgage increased by 16%.
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Like the housing market, the U.S. rental market is being held back by a lack of supply, with new properties lagging behind demand due to supply chain congestion, high material costs and ongoing labor shortages. This contributed to a 14% increase in the average rental price between 2020 and 2021.
At the same time, the average income of applicants increased by only 6% from 2020 to 2021, which led to an increase in rental arrears. On-time rental payments fell to 92% at the end of 2021 from 96% in January 2020.
“Even though conditions have been exacerbated by migratory trends over the past two years, the rental market was struggling with supply shortages even before the pandemic,” Maitri Johnson, vice president of tenant screening and employment at TransUnion, told GOBankingRates in an email. statement.
She added that while the number of building permits is at its highest level in years, supply chain issues have affected new stocks.
“This is one of the reasons the Build To Rent asset class is starting to emerge as a timely alternative/solution to increase inventory in tough market conditions,” Johnson said.
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Meanwhile, immigrants should help support the rental market going forward. More than 80% of immigrants who have lived in the US for five years or less are renters, according to TransUnion, citing data from the US Census Bureau and the Joint Center for Housing Research at Harvard University. Even after five years, most immigrants rent, including 70% of those who have been in the US for 5 to 10 years and 57% of those who have been in the US for 10 to 20 years.
“Because people who immigrate to the US tend to stay as renters for long periods of time, it’s likely that this robust growth has a combined effect,” Johnson said in a statement. “Current demand in the housing market may decline as home prices decline, but this population is likely to support increased demand for rentals in the coming decades.”
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