Increase in Renters Rental Rates
Demographics - the home-ownership rate tends to rise with age. For example, while the overall U.S. rate is 67.2%, the rate for households headed by someone under 35 is just 38.9%. Thus, whenever the age distribution of households tilts in favor of younger adults, the overall home-ownership rate declines. That happened in the early 1980s, when young baby boomers began to form households.
There seems to be substantial growth in households formed by people under 35, who mainly rent rather than own. Worsening the shift will be a decline in the number of households led by people 35 to 49 years old the very ages when there is normally a huge jump in ownership. The market does expect a rise in households led by people 50 and older, but the boost to ownership from this won't be great. Home-ownership rates tend to level off when Americans reach their late 40s and early 50s.
In the 1960s, as the baby boomers born from 1946 through 1964 began reaching child-bearing years, demographers expected an imminent birth explosion. What happened instead was an extended birth dearth that produced a "baby bust" generation, born from roughly 1965 through 1977. Then, as though to confound the demographers even further, the boomers began echo-boom generation, through a jump in births from around 1978 through 1994.
Based on the years when the boomers, busters and echo boomers were born, the size of certain age groups will expand and contract as the years pass, creating imbalances that haven't been, and won't be, altered by the net influx of immigrants into the U.S. Through 2015, those imbalances point to a decline in the rate of home ownership.
Largely because the echo boomers are more numerous than the baby busters, there are now more U.S. residents aged 15 to 29 than 30 to 44. So five years from now, the nation will have more 20-to-34-year-olds than 35-to-49-year-olds.
Similarly, largely because the baby busters are less numerous than the baby boomers, there are fewer 30-to-44-year-olds than 45-to-59-year-olds. Thus, five years from now, expect a decline in the ranks of the group that historically has been the most keen to buy homes—the 35-to-49-year-olds.