In a striking shift within the housing market, the number of renter households in the United States has surged at a rate nearly three times faster than that of homeowner households during the second quarter of the year. According to recent data released by the real estate brokerage Redfin, the year-over-year growth of renter households reached an impressive 1.9%, culminating in a record total of 45.2 million renters.
This growth, however, reflects a moderation compared to the previous quarter's robust 2.8% peak. On the other side of the spectrum, homeownership growth has significantly slowed, with homeowner households increasing by only 0.6%, now totaling 86.3 million—the slowest growth rate since 2019. This presents a stark contrast, as approximately 34% of all households in the U.S.
are now classified as renters, with metropolitan areas like Los Angeles, San Diego, and New York City exhibiting the highest percentages of renter households. The surge in renter population can be attributed to the escalating costs associated with home buying, which have outpaced rent increases. Redfin indicated that, in June, the median asking rent for apartments rose by less than 1% compared to the previous year, while average monthly mortgage payments soared by around 5%.
This divergence in cost dynamics highlights the increasing burden on potential homebuyers. Sheharyar Bokhari, Senior Economist at Redfin, elaborated on the current state of the market, remarking, "Mortgage payments climbed because home prices hit a record high and mortgage rates, although lower than their recent peaks, remain more than double the all-time lows reached during the pandemic." Despite a slight decline in homebuying costs reported in July, these adjustments have yet to rejuvenate buyer interest significantly. Bokhari also pointed out that while both renting and buying a home have seen drastic price increases in recent years, the situation in the rental market appears to be relatively more manageable.
He explained, "That's because America has been building a lot of apartments to keep pace with robust demand from renters." Indeed, the U.S. has been adding new multifamily housing units at an impressive annual rate of 563,000 as of the June quarter—marking the second fastest rate since records started being kept in 1994.
This ongoing construction boom has played a critical role in alleviating the housing shortage crisis that has gripped the country. However, it is worth noting that the pace for new multifamily building permits and commences has exhibited signs of deceleration, which could potentially lead to increased asking rents in the foreseeable future. In summary, as we navigate through this dynamic real estate landscape, the trends highlighted in this report reflect significant shifts toward renting and an overarching challenge in the housing market that warrants further attention from both prospective buyers and policymakers alike..