As would be expected based on rising prices and rates, we’ve seen a steady decline in renters moving out to buy a home.
- In June of 2021, 17.6% of renters who left our communities did so to purchase a home, but as of the latest data in September, the share of residents leaving for home buying has fallen below 11%.
- Right now, the biggest obstacle for homebuyers is sky-high mortgage rates. Today’s 30-year fixed rate is approaching 7% on average according to Freddie Mac, which is where mortgage rates were during the Great Financial Crisis.
- In response, we’ve seen a number of reports of the single-family market cooling. The Case-Shiller Index showed a slowdown in the recent release from July, with growth falling from 18.1% YoY to 15.8% YoY, which was the steepest decline in the index’s history.
What does these numbers mean for Multifamily?
- As fewer residents leave communities to purchase homes, these renters will likely remain renters for longer, leaving apartment demand relatively durable in the face of economic uncertainty.
- But with home prices cooling in response to rising rates, we could see homebuyers return, especially if the labor market remains relatively durable in the face of a mild recession.
- This is one of the major factors that is cited in support of the single-family for rent space – millennials are at a point in which they would like more space, but might have trouble affording a mortgage payment given the still-high prices and high rates.