The US housing market was a booming industry till it saw its fate in the 2008 global depression. The housing bubble burst and left homeowners in a lurch. Now, owning homes seems to be a thing of the past as an increasing number of citizens have shifted to rented homes. Over the last decade, the country has seen a dramatic growth in single family rentals. Simultaneously, the need to ensure compliance and reduce costs, paved the way for wide adoption of mortgage technology solutions.
Sizing up the market
According to a research conducted by RCLCO, between 2005 and 2014, single family rentals (SFR) accounted for 88 percent net increase in occupied single family stock. The same study also described the consumers of SFRs as those predominantly belonging to lower to middle income families, with children. The total occupied housing units increased by as much as 7 million with single family rentals occupying 65 percent of the pie.
The SFR market: An explosive growth
There are a number of forces that went into play to contribute to this explosive growth of the SFR market. The global financial crisis in the last decade set the stage for a heavy decrease in the overall housing demand. With a vast number of properties foreclosed, stringent lending requirements and high levels of unemployment, home prices fell to dirt.
Investors soon realized the huge potential in renting out homes as compared to selling them at severely deflated prices. The single family rental market which initially had been a grab only for small time investors, began catching eyeballs from large institutional investment firms.
Today, with the job market on an up-turn, young adults are choosing to leave the nest and are settling in cities that offer them better opportunities. They are forming their own families. This is leading to a higher demand for homes. With muted wages, rising student debts and an overall expensive cost of living, renting out seems to be the fairer option. Rentals provide an environment for raising children. Also, let’s not forget the fact that people today are on the go and don’t want to be tied down to one place. Having no long-term commitments means better opportunities to explore. Rentals thus are a great option for today’s ambitious generation.
Living the ‘American Dream’
A dull financial landscape led to citizens trying to make do with whatever minimal resources that they were left with. Weak economic conditions and a somewhat inert employment marketplace jolted people from not investing in houses. But what came as a breath of fresh air was the era of rented houses. Now it’s all about flexibility and renting out is the apt choice. Single house rentals have been a respite for ambitious single youngsters and families, enabling them to live the ‘American Dream’.
The Mortgage Banker’s Choice
However, the millennials—people in their twenties and thirties—have come of age and are about to make key decisions of settling down and building up their families. Market projections say that by 2020 they will constitute 50 per cent of American workforce and 75 percent by 2025. Pervasive digital media presence, next gen mortgage technology solutions and continuous personalized communication are inevitable for any mortgage lender to thrive in the new scenario.
Preethi vagadia is a business architect worked in Mortgage and Finance software department with top notch companies and has over 8 years of experience in Mortgage Lending Technology, mortgage servicing software management etc. She has also worked in several process improvement projects involving multi-national teams for global customers in warranty management and mortgage.