Rental oversupply unlikely, analysts say

The percentage of national housing stock being rented has reached one-third and continues to climb, according to a report.

 

Demand for rentals, including single-family homes in addition to apartments, has risen post-recession as slow income growth, limited savings and Americans’ preferences have shifted in favor of renting over homeownership. Vacancies fell particularly far for multifamily properties with five or more units, according to Moody’s Analytics.

 

As the signs of demand became clearer, construction of multifamily properties has increased and more single-family homes have been converted into rentals by investors. Some industry stakeholders have become concerned recently, worrying that the surge in multifamily construction has gone too far too quickly and could result in an oversupply in the next few years, to the detriment of owners, investors and property management companies.

Those fears are unnecessary, according to the report from Moody’s. In the long-term, the current pace of apartment construction is not sufficient to overtake household formation and demand. While the number of renters may drop slightly as incomes improve, many of those prospective homeowners may be happy to buy single-family properties that have served as rentals, presenting investors with some opportunity even if rental popularity falls.