Rental demand is skyrocketing as more and more millennia say it's cheaper than owning a home

In Chevy Chase, Maryland, in the southeastern suburbs of California, a condominium and rental apartment complex is on the rise, and apparently it can not happen fast enough. The demand for rental apartments in and around US cities is rising sharply, while most thought it would not be the case. The demand for rental housing was expected to decline as millennia age in their home buying years.

Demand for apartments in the second quarter of 2019 increased by 11% over last year. That in turn drove up rents by an average of 3 percent to $ 1,390 a month nationally, according to RealPage, a real estate software and badysis company.

"The demand is particularly strong during the first rental season," said Greg Willett, chief economist at RealPage. "Strong economic growth encourages the formation of new households and rents absorb a significant share of the resulting housing demand, while the loss of tenants for home purchase remains limited by historical levels. "

Despite the increase, a record 82% of renters say the rental is more affordable than the property, according to a new Freddie Mac survey, up 67% from a year ago.

"Affordability remains the key factor when it comes to deciding to rent or buy a house, and the cost of housing has a considerable impact on households of all ages, sizes and places, "said David Brickman, president and CEO of Freddie Mac. . "For millennia and many Gen Xers, buying a house is no longer just a decision based on housing and the cost of housing – the growing pressure of student loans and the rising cost of child care has a significant impact. "

Demand for rental housing is currently highest in the country's largest cities, led by Dallas, Fort Worth, Chicago, Houston, New York and Washington DC.

"The indicators we saw this year have not lived up to expectations," said Toby Bozzuto, Bozzuto Group CEO, who is currently building clbad A construction of a value of more than a billion dollars in the north and south-east. . Bozzuto's Chevy Chase project will offer 530 residential units consisting of 466 apartments, 64 condominiums and over 100,000 square feet of retail and restaurant businesses. It is also connected to a subway line, which is exactly what today's tenants want, namely Generation Y and the reduction in the number of Baby Boomers.

"I think Generation Y young people are finally yearning for housing, I think it's still the American dream, but I call it the dream postponed and it's postponed because of student loans, lack of significant capital and flexibility over fixity, "said Bozzuto. "It's a generation that loves the sharing economy, they use Uber instead of their own cars, so the apartments use their needs, flexibility and desires."

The construction of apartments began to develop in 2014 and has not declined much, despite fears that lower mortgage rates are driving tenants to buy. There are still many new products in the pipeline, which poses a risk for developers, especially as construction costs rise and the economic downturn makes it harder to increase rents.

While the construction of apartments is booming, the construction of single family homes is not. Home builders are still building for the amount of demand, charging high costs for land, labor, materials and regulations. The shortage of affordable existing homes for sale in recent years has pushed prices into the overheated range.

The shortage has begun to ease slightly over the past year, but seems to worsen again. The inventory of homes for sale declined each year in June, the first such decline in 10 months, according to Redfin. This is perhaps because a sharp drop in mortgage rates has made real estate purchases jump in late spring.

"The only problem is that if rates go down, stocks are still low and that will limit sales, so prices will go up, sales will not be as strong," said Glenn Kelman, CEO of Redfin, in a statement. recent CNBC interview.