Redfin's Newest Report Shows Explosive Growth In Renters, Leaving Homeownership In The Dust

As rising home prices continue to outpace rent growth, more Americans are turning to renting over homeownership.

The number of renter households grew significantly faster than homeowner households in the third quarter, reaching record levels. At the same time, home affordability challenges led to the lowest turnover rate in U.S. housing in decades.

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According to a new Redfin report, the number of renter households grew by 2.7% in the third quarter compared to the same period last year, reaching a record 45.6 million. This growth rate is three times faster than the 0.9% increase in homeowner households, which now total a record 86.9 million.

The 2.7% increase, amounting to 1.18 million additional renter households, was the second-fastest pace since 2015, just behind the first quarter's 2.8% rate.

For the past four quarters, renter households have grown faster than homeowner households as the cost of buying a home has outpaced the cost of renting.

The median asking rent rose by 0.6% year over year in September, though rents have remained relatively stable over the past two years. They became more affordable as wages grew by about 4%.

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In contrast, home prices increased by 6% year over year in September and have risen more than 10% in the past two years. Reflecting affordability challenges for prospective buyers, only 2.5% of U.S. homes changed hands in the first eight months of 2024, marking the lowest turnover rate in decades.

"Affordable housing has been at the forefront of this election cycle because so many people are struggling to see how they will ever become homeowners – especially those from younger generations," Redfin Senior Economist Sheharyar Bokhari said.

"With home prices at record highs and mortgage rates remaining elevated, renting is increasingly the only viable choice for many young people and families. Building more homes will help address that, but we also have to recognize that Gen Z and future generations may not view homeownership as a life goal and the rentership rate may continue to rise for years to come."

A surge in multifamily construction has helped stabilize rents and increased the appeal of renting for many people. As of the third quarter, the U.S. was adding multifamily units at an annual rate of 647,000, the fastest pace on record since 1994.

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The construction boom has met rising demand in high-growth regions, particularly in the Sun Belt. However, builders are now slowing down, with multifamily building permits down 16% year over year in September and 47% from the post-pandemic high in February 2023, the highest level in nearly four decades.

In the U.S., just over one-third (34.4%) of households are renters – a rate that has held steady for the past three quarters. Rentership is highest in California metros and New York City, where home prices are generally higher.

San Jose, California, leads with a 52% rentership rate, the highest among the 75 largest metros, followed by Los Angeles (50.8%), New York (49.1%), San Diego (48%) and Fresno, California (47.4%).

In contrast, cities where homeownership has traditionally been more affordable, such as Cape Coral, Florida, have lower renter rates. Cape Coral has the lowest share of renter households at 21.8%, followed by Charleston, South Carolina (23.7%), Columbia, South Carolina (24.5%), Allentown, Pennsylvania (27.2%) and Detroit (28.2%).

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