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Home Rentals in the USA The New American Dream?

The recession, which foreshadowed the GFC (Global Financial Crisis), struck the American economy around 2005/6. In 2012 economic data shows that while green shoots are emerging a full blown recovery is still some way off.

In fact many pundits were surprised to see the re-election of a President who had been at the helm of such an unhealthy economy. What implications has this economic situation had for the American rental market and how is the GFC likely to shape that market into the future?

The GFC of 2008 saw home prices drop around 50% across the United States. Many people lost their jobs and as a result foreclosures soared because people were unable to pay their mortgages. This has had some very interesting implications for America's rental market both for investors and obviously for those who lost their homes.

Estimated 3 million to rent single family homes by 2015

Investors have snapped up homes that were foreclosed and are now renting them out. Colony Capital has bought 1000 homes to turn into rentals and plans to invest $1.5 billion in buying single family rentals in 2013. John Burns, CEO of John Burns Real Estate Consulting told UsaToday.com that he estimated that 3 million former homeowners will rent single family homes between 2010 and 2015.

More older married couples with teens are renting

Perhaps the most interest aspect of this trend towards renting is the demographics of the people who are renting. Many of these people are not students, single professionals or young married couples but older married couples who have kids that may be in their teens. These foreclosures, in addition to job losses have also seen these people move long distances to find properties to rent. This has had another interesting effect, as many people believe that rental properties force house prices down and some cities have begun introducing laws to limit the number of rental properties in a particular area. West St. Paul, Minn., is just one such example of this phenomenon where a law has been introduced limiting rentals to not exceeding 10% in any block of homes.

Home Rental boom in California

California in particular is seeing a rental boom, and some experts are saying that the level of demand is causing overheating in the market. Rental prices are increasing to a point where a bubble may be starting to form.

Hard for people to get loans

There are two other significant factors driving demand for rental properties. Firstly, financial institutions have tightened their regulations regarding lending making it harder for people to get loans. Secondly, the psychological damage of losing a home because of a foreclosure means that many people don't want to apply for loans anyway in case another credit crisis strikes.

People who lost their houses are now becoming stuck between a rock and a hard place, unable to afford to buy a house or rent somewhere suitable at an affordable price. It is hard not to see this trend continuing until the economy further recovers from recession.


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