The new trend in long-term renting serves many apartment dwellers well. Check out the economics behind the phenomenon here.
If you see yourself living in your apartment for the foreseeable future, you are not alone. Chances are, you may fall into a category labeled “perma-renter.”
For perma-renters, apartment living isn’t a temporary situation; it’s a preferred way of life.
The number of perma-renters is on the rise. In the wake of the Recession, the housing bust and a stagnant job market, perma-renters have no interest in becoming homeowners. They’re content to stay put, seeing apartment life as a more convenient and affordable alternative to buying a home.
Here’s a look at some of the economic factors helping to create the current perma-renter boom.
The sting of foreclosure
While many former homeowners who have experienced foreclosure continue to get back on track financially, thousands are still plagued by bad credit. Even for those who maintain good credit, the uncertainty of taking on another mortgage involves too much fear.
Cautious lenders
Unlike the early 2000s when many people could qualify for adjustable rate mortgages, today’s lending conditions are more stringent. Lenders are under scrutiny in the aftermath of bailouts and, as a result, have tightened the reigns. They’ve created restrictions that make it more difficult for the average person to qualify for a loan.
Higher down payments
Because lenders want to ensure they’re only extending credit to qualified buyers, many of them are also requiring higher down payments than in the past. In previous years, certain loans allowed borrowers to pay only three to five percent down. More recently, lenders may require buyers to show up to closing with as much as 20 percent of the total. Many simply cannot come up with that sum of money.
Rising interest rates
While interest rates are expected to remain low, according to Forbes, they won’t be as low as the rock-bottom rates we saw during the height of the Recession. Those low rates spurred many who could afford home ownership to take the plunge. But with rates rising a bit, those low-interest benefits are leveling off.
Sluggish job market
The job market is slowing right now, with fewer jobs being created, hiring slowing down, and wages staying put. Many workers find themselves underemployed, struggling with job loss, or feeling they don’t have all the options of a prosperous position. The idea of being free to move to find a better job makes renting appear the better option.
Renting as a way of life
All of these economic factors have combined to create a new demographic of long-term renters. Many Americans now consider renting an acceptable, even preferable, way of life that poses less financial risk and more freedom than home ownership allows.
As more Americans latch on to perma-renting, the good news is that it’s creating more and better choices in the apartment marketplace. Across the country, apartment managers and property management companies are adapting to the changing needs of renters, implementing preferred new amenities that favor loyal, long-term renters.
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