Homeownership just hit a 12-year high. According to the latest Census Bureau data, the U.S. homeownership rate surged to 67.9% in the second quarter of the year -- up 3.8 points since Q2 2019 and its highest level since 2008.
While it's good news in general, indicating more families can afford the much-coveted American dream, for investors -- particularly those heavily reliant on rental properties, it's another story.
Are you invested in rental properties? Worried about what this sudden jump in homebuying means for your bottom line? Don't be. The news isn't as bad as it seems.
Renting is still popular, but you may want to diversify
Just because the homeownership rate is high doesn't mean renting is falling out of favor. Census data shows that the overall rental vacancy rate was actually down a full percentage point in the second quarter, both over the year and month over month. It's actually at its lowest point in at least three years.
Simply put: There's still demand for rentals -- and a lot of it. But there's also rising interest in buying properties, especially as mortgage rates continue to drop. Throw in social distancing efforts and the rise in work-from-home arrangements, and many Americans are just looking for more space and more privacy, things not often available when renting.
As such, it might be a smart time for rental property investors to diversify. Don't dump your rental investments entirely, but consider branching out into other, owner-focused avenues of investing. This could include:
- Fix-and-flip investments: Snap up a foreclosure or fixer-upper, invest a little TLC, and flip it for a profit. Just make sure you study up on the market and don't overimprove. Do it right, and you can make a pretty penny per project. (The average home flipper makes just under $63,000 per flip.)
- Wholesaling: In real estate wholesaling, you find a motivated seller, secure the contract for it, and then assign that contract to another buyer. Wholesalers can make up to almost $100,000 per year, according to our research.
- Builder and developer real estate stocks: Investing in companies on the ground floor of residential real estate can be another way to leverage the current buying trend. Examples include Lennar Corporation (NYSE: LEN), earnings up 27% in Q2, Beazer Homes (NYSE: BZH), revenue up 16%, plus 12% jump in closings in Q2, and KB Home (NYSE: KBH), which is currently seeing higher revenues and earnings per share than last year.
The bottom line? Surging homeownership isn't an omen for rental property investors -- it's an opportunity. Find a way to seize it and grow your business even more.
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