Renting has become the "norm" for Generation Y, or millennials, says Pangea Properties President Steve Joung, and will likely stay that way for the foreseeable future.
Pangea is a real estate investment trust, or REIT, focused on the residential multifamily housing market. It's invested more than $250 million in 10,000 apartment units in Chicago, Indianapolis and Baltimore alone.
Unlike their parents and grandparents, millennials don't view housing as a lifelong investment, Joung said this week in a briefing highlighting that new-home starts for rental units are at their highest level in decades, accounting for about one in every three new housing units.
Private housing starts hit an annualized pace of 880,000 in January, and 300,000 for multifamily units in buildings with five or more units, according to the U.S. Department of Commerce. The overall starts level was 2% lower than a year earlier and down 16% from December.
New-construction data for February will be released on Tuesday.
Homeownership rates in the U.S. have fallen steadily since 2004, from 69.2% in 2004's fourth quarter to 65.2% in the fourth quarter of 2013, according to government statistics.
The latest rate was up slightly from the first quarter but down from the third. Last year's homeownership rates were the lowest since 1996.
REITs In Focus
Privately held Pangea and publicly traded apartment REITs such as AvalonBay Communities (AVB), Camden Property Trust (CPT) and BRE Properties (BRE) stand to benefit from increased demand for rental housing.
Some homebuilders have stepped up efforts to address the rental market as well.Lennar's (LEN) fledging rental-apartment division had 11 communities under construction at the end of the fourth quarter and one finished.
The best-performing rental-focused REIT in IBD's Finance-Property REIT group is BRE Properties, with a Composite Rating of 85 out of a possible 99. Meanwhile, Mid-America Apartments (MAA) has a 63 CR rating and Camden Property a 54. The largest name in the group, Equity Residential (EQR) has a low rating of 28.
The group ranks No. 120 of the 197 that IBD tracks.