More Americans are renting houses instead of buying them, a trend that could disrupt price affordability, analysts say.

With more homeowners unable to secure mortgages and uncertain about future finances, renting is the only sure-fire way to live in a single-family property, according to Capital Economics.

But as more Americans turn to home renting, the influx of demand is set to squeeze the nation’s rental supply, pushing monthly rents even higher.

“As a consequence of Americans being less willing and less able to buy a home, the number of households in rented accommodation is set to rise by at least 850,000 a year over the next few years,” said Paul Dales, senior economist with Capital Economics.

Dales’s said in his research that rental vacancy rates will fall again in the future, pushing prices up.

The median rent is already up to $712 per month—well above the average monthly mortgage cost of $647, Dales reported.

He estimates vacancies in the home-rental market will push average rental rates up as much as 5% by early 2013, compared to 2.4% in January.

“We expect the annual rate at which rents are rising will rise to 3% this year and remain at that level in 2013,” Dales said. “Assuming that the economic recovery gains firmer footing, in future years there is scope for rents to rise by around 4% a year.”

And as single-family renters head into the market, the supply of rentals is unlikely to meet new demand.

This reality is playing itself out in Denver, where the vacancy rate for home rentals fell from 3.4% in the third quarter to 2.1% in the fourth quarter. At the same time, the vacancy rate edged up slightly from the 2% level reported in the fourth quarter of 2010.

“The vacancy rate went up slightly year-over-year,” said Ryan McMaken, a spokesman for the Colorado Division of Housing. “That doesn’t mean much, though, because when you’re looking at vacancy rates below 3%, the bottom line is that the market is tight. For many people, it’s not easy to buy a house right now, so they’re renting.”

By Kerri Panchuk
Housing Wire

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