States weren't the only things flipping lately. A new study of 10 years of census data finds residential renting has now become the majority -- "flipped" in election parlance -- in 23 cities with 100,000 or more residents, mostly in major urban areas, while homeownership moved ahead in 12 of those medium-to-large cities.
Those local results have occurred while overall homeownership has reached an all-time high and renting reached a seven-year low in 2019, according to the report released this week by RENTCafe, a nationwide listing service operated by Yardi Systems.
RENTCafe said in its report: "The renter population grew by 8 million in the last decade and is now 107.4 million strong... but is far from the 2015 peak when 111 million Americans rented their homes. Meanwhile, the owner population grew by almost 11 million, reaching an all-time high of 212.7 million,"
And, of course, since all real estate, like politics, is ultimately local, the results vary from market to market.
For instance, new majority-owner cities include Chicago; Sacramento, California; Reno, Nevada; and Baltimore, while cities that transitioned from an owner to a renter majority include Seattle, Pittsburgh, and Memphis, Tennessee.
Interestingly, four of the top 10 cities with the fastest-growing share of renter population are in Texas: Frisco, Plano, and McKinney in the Metroplex and The Woodlands in suburban Houston. Frisco and Plano alone saw a 59% and 41% growth in renter share, respectively, from 2010 through 2019, while Hartford, Connecticut, saw the largest jump in owner share, increasing by 27% in that same decade.
Different reasons but same results for rental rise
The reasons for shifts to renting 10 years ago and now are quite different, the RENTCafe report points out. Many Americans lost their homes or put off buying a home in the early 2010s after the Great Recession, leading to the rental population peaking at 111 million and homeownership bottoming out at 200 million, RENTCafe said.
Then, a recovering economy helped flip the stats, driving rentership down to 107 million and homeownership up to nearly 213 million as the decade ended in 2019, RENTCafe said, basing its conclusions on census data released in September 2020.
While this was before the pandemic, there's still a new phenomenon. Said the RENTCafe report, "Furthermore, as the main trendsetters of the decade, millennials introduced a new concept in renting that defined the 2010s -- the 'renter by choice,' which is a renter who prefers a flexible, higher-quality, urban lifestyle."
That largely explains why among cities of 100,000 people or more, those were the 23 flips to renter-majority in the past decade and only 12 to owner majority, the report said.
And then comes Gen Z. Bottom line: Consider each market on its own
So what does this mean looking ahead? And what does it mean for investors? RENTCafe says to look to the next generation: "An estimated 45 million Gen Zers will have entered the housing market by 2025, most of whom will likely rent. And, if the current behavior patterns of young millennials and adult Gen Z-ers continue, the renting lifestyle is poised to regain some ground in the next decade and maintain a solid footing in urban areas."
The takeaway: Each market will be different in terms of how many people are fleeing there to get larger homes and more space between them and pandemic-stricken center cities, as well as whether the urban lifestyle will regain its attraction, especially for the younger set.
And then there's the question of how many will be renting and how many buying to own. That's something each real estate investor will need to consider based on what they see in their individual market in terms of job growth, amenities, and all those other things that make a place somewhere folks want to live, as tenants or owners.