The U.S. housing market is undergoing significant changes, with first-time homebuyers now reaching an unprecedented age of 38, according to a 2024 report by the National Association of Realtors (NAR). This shift in demographics highlights the increasing challenges faced by younger generations in purchasing homes. Concurrently, the rental market is experiencing its own set of transformations, as the average 30-year fixed-rate mortgage slightly decreased to 6.87% by the week ending February 13, 2024, based on Freddie Mac data.
The rental landscape also shows notable trends. The typical asking rent for a property in a multifamily home rose to $1,820, marking a 0.2% increase from the previous month and a 2.7% rise from the previous year. This modest uptick reflects the impact of a construction boom in multi-family buildings, which has moderated rent prices for apartment units across the U.S. In contrast, single-family home rents have surged significantly since the pandemic, with median prices up approximately 41% as of January 2024, according to a recent Zillow report.
The disparity between renting costs for single-family homes and multi-family units is stark. As of January, the typical asking rent price for a single-family home reached $2,179, showing a 0.3% increase from December and a 4.4% rise from January of the previous year. These figures underscore the largest recorded gap between single-family and multi-family rental costs since Zillow began tracking these metrics in 2015.
"Renters are stuck renting for longer," said Orphe Divounguy, an economist at Zillow.
The median age of renters in the U.S. is now 42, with millennials comprising about 31% of this demographic. Many renters find themselves unable to transition to homeownership due to economic constraints and rising housing prices. Data from Redfin reveals that the median sale price for homes nationwide was $375,475 in the four weeks ending February 16, representing a 3.7% increase from the previous year.
"Single family rentals are detached homes, perhaps with a yard," explained Jessica Lautz, deputy chief economist at the National Association of Realtors.
"Demographics play a huge role here," added Lautz.
The current market conditions emphasize the importance of financial stability for potential renters of single-family homes. Prospective tenants must possess strong income levels, robust credit scores, and low debt-to-income ratios to compete for these properties.
"Having a strong income, strong credit score and lower debt-to-income ratios," noted Divounguy.
Meanwhile, multi-family rents have risen by 26% over the same timeframe as single-family rental increases. The burgeoning construction of multi-family properties has played a critical role in curbing more substantial rental hikes in this segment, offering some relief to those seeking affordable housing options.