According to a new analysis by multifamily data firm TransUnion, 55% of mortgage shoppers in the first quarter of 2017 were identified as “nonhomeowners,” a category that consists largely of renters. This represents a significant shift in the mortgage market over time, up from 50% of mortgage shoppers in the first quarter of 2016 and 45% in Q1 2015.
At the same time, a rising number of potential home buyers are millennials, who have traditionally shown a preference for rental units. In Q1 2017, 29% of nonhomeowners who shopped for mortgages were between the ages of 18 and 36, up from 28% in 2016 and 27% in 2015. Thirty-four million renters in the “prime homeownership” age range of 25 to 44 are eligible for a mortgage, TransUnion reports, and 34% of renters under the age of 44 have a relatively low credit score of 580 or less.
Michael Doherty, senior vice president of TransUnion’s rental screening solutions group, notes that these findings may indicate a coming reversal of multifamily occupancy trends. “Since 2009, we’ve seen a steady increase in occupancy of rental units in the U.S. that peaked at about 2016,” Doherty says. “Since then, it’s flattened and fallen very slightly. But … homeownership’s been trending down for a long time. This could indicate that we might see a reversal of that trend, and homeownership will kick back up. With that, there’s the potential to drive occupancy rates down from where they’ve been.”
Doherty notes that as these trends continue, property managers will need to examine how their communities appeal to renters, and how they can expand or modify their properties’ offerings to attract new renters or retain existing tenants.
“We think it’s worth it for property managers to pay attention to these sorts of metrics. If we’re on the cusp of a new trend, that definitely has some implications for them,” Doherty says. “… I do think it’s up to property managers and owners to figure out, for their particular customer base, what is the right sort of service. For those who rent Class A properties, it might be a very different set of amenities from student housing or affordable housing.”
One recommendation that applies across property types is to provide rental payment reporting for tenants. In a prior survey, TransUnion found that 51% of renters were more likely to choose a property if they knew that the landlord reported their rental payments to credit bureaus. The same survey found that 79% of renters prioritize rental payments above other monthly bills.
“There’s very few [property managers] who report rental payments to credit bureaus,” says Doherty. “So there’s a relatively low share of renters out there who are getting credit for their rental payments, and it’s impacted their credit scores.”