The National Association of Realtors reported fewer first-time homebuyers entered the housing market as these younger families struggle financially to save for the down payment of a new home. The NAR survey revealed first-time buyers accounted for just 33 percent of existing home sales in 2014 – the lowest level seen in 27 years.
The number of first-time buyers this year dropped 5 percent compared to the previous year (38 percent), which is lower than the historical share of about 40 percent of all home sales.
The 27-year low in first-time buyer homeownership could be partially due to higher levels of competition, which may result in a decreased inventory of low- to mid-tier homes.
“Adding more bumps in the road, is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums,” says NAR Chief Economist Lawrence Yun.
With fewer first-time homebuyers dipping their toes into the market, the sector for single-family rentals could pick up as people are looking to rent homes before they have the financial means to buy a permanent house.
Investors focusing on increased cash flow
According to commercial real estate information firm CoStar Group, single-family rental market will see a greater number of investments in these types of properties.
Analysts from financial holding company Nomura Securities said institutional ownership of single-family rental properties saw increases with investor participation in the market recovering after drops in the value of the residential market. They also noted the pace of portfolio growth decreased.
Many investors are looking into options to increase their cash flow without having to deal with the responsibilities associated with being a landlord, The Wall Street Journal reported. Investors hoping to see a rise in cash flow as extra income could invest in rental properties, which means steady income if these homes are filled with responsible tenants who pay on time.
“I was looking for what I consider a more stable return on investment,” said Mike Cook, a real estate investor and manager at a construction-materials firm, according to the Journal. “It’s not about appreciation of properties. It’s really about cash flow.”
As more investors explore their options in the single-family rental home market, they could connect with an experienced real estate investment firm to aid in the search for potential rental properties, advertise investment homes to tenants, and manage them to ensure steady cash flow.