High rents and low income are driving roommates together. According to the Census Bureau, the United States has hit a twenty year low in home ownership. The rate hit a surprising 64% by the end of 2014 which is a 1.2% drop from 2013, down from 65.2%. During 2014’s fourth economic quarter, the rental vacancy percent hit an astoundingly low 7%, again 1.2% lower than the same quarter in 2013.
In 2014, according to Zillow’s twitter account, there was a gain of 770,000 new renters in the United States. This rise in the amount of renters accumulated into a total of about $441 billion during a one year period. With home values rising more slowly than rental fees in most areas, there is a widely speculated expectation that 2015 will see another jump in cumulative rent paid.
Stan Humphries, who is Zillow’s Chief Economist, has stated that rents have risen at twice the growth rate of income because of insufficient supply of rental housing growth, a rental demand that is unable to be met, and a generally weak income growth in those consumers looking to rent their homes.
Due to these findings by Zillow, many adults are finding that when combined, high rent, debt, and a low income are much more manageable with a roommate in tow. Not only young adults and people in their early twenties are finding moving back in with their parents to be a smart idea. More than a third of American adults have either moved back in with mom and dad or found roommates to ease the financial strain being caused by renting. Because of these men and women doubling up, there are many new opportunities for investors and rental housing owners to seek.
This doubling up effect is causing what can be compared to a coiled spring effect. The people are compressing themselves into less and less space, leaving more open areas for property owners to eat up and turn into rental property. With more open rental property, the properties will be seen at lower values, which will seem more enticing to the roommates. Once these doubled up partners begin finding that rent is finally in a more manageable area financially, they can start going back out on their own. The spring will snap back out soon enough and people will start renting once more.