Several factors have combined to increase the demand for apartments over the last few years. Since the collapse of the housing bubble, both people and banks have become more averse to financial risk, especially for mortgages. Homeownership became harder to obtain and coupled with the sharp increase in foreclosures, many renters were back in the market for apartments at a time when the supply of new apartments was decreasing. Job losses, decreased incomes, reduced asset values and other financial hits that occurred as a result of the Great Recession have forced others to downsize as well. Another wave of former homeowners may be entering the rental market soon as a recent Inspector General report indicates that nearly half of the mortgages modified in 2009 under the Home Affordable Modification Program (HAMP) are in default again.
Homeownership rates have steadily declined from a historical high of 69.2% in 4Q 2004 to 65.0% in 1Q 2013. For each one percentage point decline in homeownership, there is a shift of approximately 1.1 million households to the rental market. As seen in the chart below, homeownership by age cohort has declined across the board since 2005 and more noticeably for the younger cohorts.
Read more...Impact of Homeownership Rate & Household Formation on Apartment Demand
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