Commercial Real Estate Trends: What Homeownership Rates Can Tell Us
One major housing question many adults face at some point in their life is the question of whether to rent or buy. It can take time to save up for a down payment and prepare for the responsibility of homeownership, but buying a house is an investment many aspire to. Renting, on the other hand, has its own set of pros and cons.
If you’re interested in investing in multifamily rental properties, you should be keeping an eye on the homeownership rates in your area, as they can significantly impact the rental market. Read on for more information about homeownership rates and how they can impact your investments.
What is homeownership rate?
Simply put, homeownership rate is the percentage of owner-occupied households in a given area. There are many ways to look at homeownership rates, and many ways to segment homeownership data according to specific geographic areas, demographics and more.
In the United States, the current national homeownership rate is around 65.4%. The homeownership rate hit a peak of 69% in 2005 and then dropped as low as 62.9% after the economic recession of 2008. Typically, about a third of all households in the US are renter-occupied and two-thirds are owner-occupied.
In addition to the changes over time and according to economic conditions, homeownership rates vary by region, age, race and ethnicity, household income and more. For example, in Iowa, the homeownership rate is around 72%. Homes are relatively affordable in Iowa, so more individuals are able to buy instead of renting. By contrast, the homeownership rate in California is around 55%. Real estate in California is, on average, more expensive, so more people stick to renting.
We recommend taking a look at the US Census homeownership data to find the relevant information for your area.
Why keep an eye on the homeownership rate?
The main reason for multifamily investors to keep an eye on the homeownership rate is fairly obvious. If the homeownership rate is trending up, that means more people are going to be exiting the rental market, and there will be more rental vacancies. If the homeownership rate is trending down, that can indicate that more people will be renting. While it’s impossible to predict the future, looking at commercial real estate trends can provide useful insights, especially for those looking to invest in multifamily properties.
As you study homeownership rates and trendlines, investigate things like mortgage interest rates and other things that can cause the homeownership rate to shift.
The Katalyst Team: Tracking Commercial Real Estate Trends in Iowa and Beyond
Our team is eager to help you find success as a multifamily property investor. If you have any questions about commercial real estate, don’t hesitate to reach out to our team.