Where Are Future Homebuyers Hiding? In Single-Family Rental Properties

MCLEAN, VA--(Marketwired - Aug 25, 2015) - New Freddie Mac (OTCQB: FMCC) research provides insight into the question of which renters are likely to buy a home? The research shows that people renting single-family properties (renting a house/townhouse or condo) may be more likely to buy than those in apartments. In the U.S. about 15 million households rent a single-family house and 25 million rent an apartment, according to U.S. Census Data.

The latest research, conducted in June, shows fifty-five percent of renters, both of single-family and multifamily properties, plan to continue to rent in the next three years. Single-family renters are significantly more likely to say they expect to buy than multifamily renters (53 percent vs 36 percent) when asked about their plans in the next three years.

In addition, satisfaction with one's rental experience may be a factor when deciding to buy a home. According to the June survey, renters who are most satisfied with their rental experience are more likely to continue renting (68 percent) than to purchase a home (32 percent). Sixty-seven percent of apartment renters report being satisfied compared to 60 percent of single-family property renters.

"As we gather data each quarter, we are finding the old perception that renting is something people do until they buy is not always true. The trend shows that satisfied renters are more likely to continue renting, even as we are seeing rising rents in the market," said David Brickman, executive vice president of Freddie Mac Multifamily. "Dissatisfaction may drive renters to buy, and we are seeing a slight decrease in satisfaction among single-family renters. We will continue to monitor this for stronger indicators and trends, but for now, the single-family rental home market may be a good place to look to find potential home buyers."

Brickman added, "The number of U.S. renter households is up again for the tenth straight year, according to the U.S. Census Bureau. More households of all sizes, income levels and age ranges now rent their homes. Renters are leading household formations, which are expected to keep climbing due to the improving economy, Millennials continuing into adulthood and immigration."

Potential Effect of Rising Rents

Forty-four percent of renters who have lived in their home for two years or more say they experienced a rent increase in the last two years, compared to 38 percent in March. Of those who experienced a rent increase, 70 percent agreed that they would like to buy a home but cannot afford to at this point while 44 percent indicate they'd like to buy a home and have started looking. This response was about the same in both the June and March surveys. Forty-nine percent say they like where they live and will stay regardless of rent increases, similar to 46 percent in March. Forty-four percent agreed with the statement that they now have to put off their plans to purchase a home, compared to 51 percent in March.