Home Price and Ownership Trends and How They Impact the Depth of a Renter Pool
Analyzing single-family affordability is an important data point to understanding the current and potential size of a metro’s renter pool. In other words, it’s another pin in the map to help you forecast. Here’s what we mean: The U.S. average for single-family home prices was four times larger the national median income. If we use this figure as a demarcation line, we can identify the metros in which single-family home ownership is affordable and less affordable than the national norm. Does this fact influence single-family home ownership and subsequently the size of the renter pool? Common sense says yes. But some of the results may actually surprise you.
Using 3rd quarter 2014 data from Moody’s economy.com and the U.S. Census Bureau, the chart illustrates the most and least affordable metros nationally, as well as the homeownership rate for each. The California markets won’t surprise you, but what about Orlando, Phoenix and Dallas? Because Florida is a judicial state and the foreclosure process takes longer, it’s taking more time in Orlando to level out the foreclosure inventory and get back on track after being so far underwater from the housing crisis. In Arizona, despite primarily being a non-judicial state, the story is similar. However, Dallas was the biggest surprise in the group. Dallas is widely known as an affordable metro, yet even with a good economy and robust housing market, homeownership proves out to be well below the national average – rather than standing out as a superstar. Perhaps this is due to a growing population of 20- to 24-year-olds who, as a group, prefer to rent. Or maybe it’s due to tighter underwriting requirements. Or maybe it’s just the fact the population is increasingly diverse and single-family housing isn’t as cheap in Big D as it once was.
In the end, there’s value in turning the lens on the single-family market to uncover insight into the most advantageous apartment markets for investment.