It stands to reason that this year’s high home prices and a spike in mortgage rates will lead to more renters at the expense of homeowners.
But this trend has already started in the last decade. Apartment search site RentCafe found that out of 1,553 ZIP codes analyzed in 50 major cities, 101 converted to the majority of renters from the majority of homeowners between 2011-2020.
This brings the number of postal codes for the majority of tenants to 632, or 41% of all postal codes.
The number of renters rose 12% between 2011 and 2020, compared to a 4% increase in homeowners, according to the Census Department.
Below are the postal codes that experienced the largest percentage increases in renters during the period 2011-2020.
Columbus Force, Chicago Zips
As for the 43,240 in Columbus, it is a densely populated area that contains the Polaris neighborhood, which has many tenants with an average age of 31, according to Rent Cafe. The per capita income of the residents is $43,000, which is 25% higher than the Columbus metropolitan area.
Looking at 60606 in Chicago, it includes the West Loop neighborhood. “A thriving community boasts 63% of the rented population, the majority of which are millennials [birth years 1981-96] And General Zyers [birth years 1997-2012] With high academic achievements,” Rent Cafe said.
For 2022, if you’re a potential homebuyer now, you might also want to stay on the sidelines until mortgage rates drop and home prices drop to reasonable levels.
The average 30-year fixed-rate mortgage hit a 20-year high of 6.92% in the week ending October 13. The median sale price of existing homes was $389,500 in August, up 7.7% from the previous year, though. It is down 3.5% from July.
Of course, it may take a year or more for mortgage rates and home prices to return to reasonable levels. So as a potential buyer you have to either be patient or pay.
Benefits for tenants and investors
If you decide to rent, you may benefit from the recent price drop. Average rental demand in the top 50 cities fell 0.7%, or $12, to $1,759 in September from August, according to Realtor.com. This follows a 0.6% drop in August, the first decline since last November.
To be sure, rents are still up 7.8% in the 12 months through September. But this was the lowest rate in 16 months.
If you’re someone who likes to invest in rental properties, apartment REITs have been slipping this year amid rising interest rates.
So current REIT price levels may turn into bargains. The Nareit Apartment REIT Index has lost 30% year-to-date through October 13.
Among the real estate real estate funds highly rated by experts Avalon Bay Communities (AVB) And the Residential property (EQR) And the Camden Property Fund (CPT) And the Mid-America apartment communities (MA) .
But be warned: These REITs may fall further as the Federal Reserve continues to raise interest rates. You may want to start with small positions.
The author of this story owns shares in the AvalonBay and Mid-America Apartment Communities.