Housing Shortages Drive Rental Market

Rising interest rates and declining residential-construction activity are expected to drive more Americans into the rental market.

Confusion about the housing market may also be causing homebuyers to rent for longer than they otherwise might. Market Insider reports that apartment vacancy rates have fallen to 5.6 percent in the third quarter of 2018, down from 5.9 percent last year.

"Home sales are set to tread water over the next couple of years, which is good news for the rental sector," the Capital Economics economists Matthew Pointon and Andrew Burrell wrote in a recent research note. "If Americans aren't buying homes, many will look to rent one instead."

Economists expect that to cause rental prices to increase within the next year or so, depending on how much supply comes onto the market in the meantime. Meeting demand could be particularly difficult in the West and in the South, according to First American's chief economist, Mark Fleming, as younger renters move toward technology hubs.

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