NEW YORK (2/10/15)--In the 11 largest U.S. cities, the number of renters has surpassed the number of homeowners, according to a recent report.
|(NYU Furman Center/Capital One Graphic)|
While renting has always been more popular in the nation's major cities compared with the suburbs, for the first time the preference for the majority of city dwellers is to rent rather than buy, according to the report from New York University's Furman Center and Capital One Financial Corp. (The Wall Street Journal Feb. 9).
As recently as 2006, renters held the majority in only five of the 11 metros.
This change, seen even in lower-density and more affordable cities such as Dallas and Houston, could greatly affect both rental and ownership markets.
"As the number of renters grow, if the supply of rental housing does not keep up--as it has not in most of these cities--then vacancy rates will fall, rents will rise and more renters will struggle with the costs of housing," Ingrid Gould Ellen, Furman Center faculty director, told The Wall Street Journal.
The trend could be a reflection of the financial and psychological effects the housing market crash has had on consumers.
In Chicago, for example, renters held the majority in the 1990s leading up to the housing boom; lost the majority during the boom; and have since regained the majority in the years following the financial crisis.
Demographic changes also have played a part, with younger generations preferring to rent rather than buy.
But perhaps the biggest driving factor has been tepid income growth and weak savings rates that continue to dog U.S. consumers. Saving to buy a home becomes even more difficult when rental vacancy rates drop and rental prices rise, according to The Wall Street Journal.
"For many people, the biggest obstacle to buying is saving for a down payment, which is more difficult if you're paying a lot of rent," Jed Kolko, chief economist at Trulia Inc., told The Journal.