Home Rental Securitizations Are Born A publication of Winter issue 2014 sponsored by CRE Finance World Winter 2014 53 he single family rental (SFR) market became one of the most talked about developments within the securitization markets in the past year. While it seemingly came out of nowhere, the market has existed for decades. The growth over the last two years and the beginning of a securitization market can be traced back to the magnitude of the decline and the eight years that have passed since the housing market peaked, which have perhaps forever changed the way households view the choice of buying a home. One of the clearest examples of the change in mindset regarding the purchase of a home is the decline in homeownership rates. Since 2000 the homeownership rate in the US has hovered around 68%; peaking near 70% during the home-buying boom period. Since the bust, however, the rate has fallen to the current level of 65%. Even more important than the overall decline has been the change in homeownership rates in younger households. There are roughly 15% fewer homeowners under the age of 35 and 34-44 than there were in 2005. Figure 1 Home Rentals Are Growing in Popularity as the Ownership Rate Declines Source: Deutsche Bank, Census bureau As the ownership rate has fallen in recent years there has been a corresponding divergence in the rate of household formations between owners and renters. Since 2005 the rise in renter households has outpaced owners by approximately a factor of 10. The last year the number of renter households fell was back in 2004 while the last sustained decline in the number of households were the three years between 1998 and 2000. Owner households by contrast are in the seventh consecutive year of decline. Figure 2 The US Has Become More of a Rental Society Source: Deutsche Bank, Census bureau We also believe another factor behind the increase in demand — particularly in the younger age demographic — is the rise in student loan debt levels. Student loan debt has been the only type of household debt that steadily increased through the Great Recession, rising from $579 billion in 2008 to nearly double that level currently. The higher debt level reflects an increase in both the number of borrowers and the average balance per borrower. For example, at the end of 2012, 38.8 million borrowers had student loans with an average loan balance of $24,803. That compares negatively to year-end of 2007 when there were 10 million fewer borrowers and the average loan balance was only $18,957. Figure 3 Student Loan Debt Is the Only Kind of Household Debt that Grew Through the Recession Source: Deutsche Bank, FRBNY T Harris Trifon Research Analyst Deutsche Bank Securities Inc.
CRE Finance World, Winter 2014
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