Rising housing prices are leading many Americans to live in the rental pool

With the cost of buying a home rising faster than the cost of renting over the past four quarters, it’s no surprise that rental households are seeing greater growth than their owner-occupier counterparts.

The increase in rental housing is outpacing the growth in homeownership in the US, now at a record 45.6 million. That was up 2.7% year-on-year, according to the report Redfin report.

This rate of growth is three times faster than the 0.9% increase in the number of homeowners, now numbering 86.9 million. Notably, the 2.7% increase represents 1.18 million additional rental homes and marks the second fastest annual growth rate since 2015.

Median rents were up 0.6% year-on-year in September, but rents remain the lowest they’ve been in two years. Rent has become more affordable as wages have increased by around 4%.

On the other hand, home prices rose 6% year-on-year in September and jumped more than 10% over the past two years, according to Redfin. And only 2.5% of US homes changed hands in the first eight months of 2024 – the lowest. average in decades.

Redfin cited the growth in multifamily construction over the past few years as one of the reasons why rents have remained stable. The US added new multifamily units at an annual rate of 647,000 since the third quarter — the fastest pace on record dating back to 1994.

A surge in multifamily construction has met demand in some areas, particularly in the Sun Belt states, but builders are now slowing. In September, permits for new multifamily units fell 16% year-over-year and were 47% below the peak reached in February 2023, which was the highest level in nearly 40 years.

More than one-third (34.4%) of homes in the US are rental homes – a figure that has remained low for the past three quarters.

The employment share is highest in expensive metro areas in California and New York City. San Jose has an employment rate of 52%, the highest among the 75 largest US metros. It is followed by Los Angeles (50.8%), New York (49.1%), San Diego (48%), and Fresno, California (47.4%).

Employment rates in affordable metros are low. In Cape Coral, Florida, 21.8% of households are renters. It is followed by Charleston, South Carolina (23.7%), Columbia, South Carolina (24.5%), Allentown, Pennsylvania (27.2%) and Detroit (28.2%).

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