It’s a classic question for families looking for a home: should we rent or own? Though real estate has had its ups and downs in the last several years, recent research from the Urban Institute indicates that new renters will quickly outpace new owners over the next several years.

Trends Indicate a Rapidly Growing Rental Market

Existing homeowners are still expected to outnumber renters, but home ownership is expected to decline. According to the Urban Institute, 22 million new households will need homes to rent or buy in the next 15 years, but only 9 million of these households will choose homeownership. Projecting further, by 2030, the homeownership rate is expected to drop to 61.3% from 65.1% in 2010. The increase in demand for rental properties is expected to drive up lease rates in markets with a limited supply of rental properties.

Why Are Families Choosing to Rent?

One reason is that many are questioning the long-term value of home ownership, particularly after the recent housing crashes that made home investments lose tremendous value, or worse, go underwater. Include all the costs of home ownership and you can see why many who might consider buying a home would be skeptical.

But even those who do want to buy a home are often priced out by either rising mortgage payments or a down payment that is simply too high. In 2015 alone, the average fixed-interest on a 30-year mortgage has risen from 3.73% to 3.89%, and the year isn’t even over. Most are expecting interest rates on mortgages to continue to rise.

Saving for the down payment on a house becomes more challenging when you figure that most people will rent until they can afford to buy, but because of high demand, rental rates are dramatically increasing, leaving less income to save.

As the Market Shifts, Opportunity Arises

Though this may be bad news for potential first-time homebuyers, it is great news for those who wish to invest in a rental property. According to research from RealtyTrac, low supply of rental properties has increased rates on 3 bedroom properties by 3% this year alone. As demand outpaces the supply, you can expect the prices for renters to steadily increase, unlike homebuyers locked into a fixed rate mortgage payment. For rental property owners, this spells an attractive investment with increasing returns.

Interested in Becoming A Rental Property Owner?

If you’re interested in hearing more about rental property investment options, talk to your financial adviser about the tax rules, mortgage alternatives and most advantageous places to invest. PDM’s tax experts can help advise you on the best course of action. Contact us; with our years of technical experience, advanced training, and cutting edge technology, we are your financial partner.