Renting on the rise

Renting on the rise

Shontina Kuykendoll has bought houses before as her jobs took
her through several major U.S. cities.
Shontina Kuykendoll has bought houses before as her jobs took her through several major U.S. cities.

But since moving to the Dallas area three years ago, she’s been a confirmed renter.

“I actually considered purchasing in Dallas,” said Kuykendoll, who recently moved from Lewisville, Texas, to a new apartment near downtown. “But when I saw this community, I fell in love with it.

“When people come to my house, they say it reminds them of a luxury hotel.”

She’s one of a growing number of urban residents across the country who are opting out of the tumultuous housing market for the convenience and economics of renting.

“The risk factor is extremely high right now with homebuying,” Kuykendoll said. “When you are in your mid-40s and may not be living in the same city or state for 10 or 15 years, it’s difficult to purchase properties because you can’t sell them if you have to move.”

Lenders have also ramped up mortgage standards, making it tougher for buyers to qualify and reducing the price of homes they can afford.

Kuykendoll didn’t have to cut back on her new digs. The Alta 1900 Lofts includes a resort-style swimming pool, 24-hour gym, a pet park and a decked-out clubroom with big flat-screen TVs.

“It really has a condo feeling,” she said. “Friends who come by are very envious.”

The shakeout in the housing market has drawn millions of Americans into renting.

The U.S. homeownership rate is at the lowest level in more than two decades and still falling. About 3 million Americans have become renters since the home sector crash began a few years ago, studies show.

Award-winning chef and restaurant owner Kent Rathbun and his family have lived at the Heights high-rise apartments in Dallas almost two years.

Rathbun said eventually he will build a house, but for the time being he’s enjoying the luxury rental.

“We chose the Heights because of the proximity to all our restaurants, security and amenities,” he said. “We have truly enjoyed living here and have been able to host a lot of events not only in our place but in the common areas, so it’s been great for our family.”

With the price of homes around the country dropping by the greatest share since the Great Depression, you’d think more renters would be looking to buy. Home financing costs are also near record lows.

But uncertainties about the economy and housing prices are keeping many potential buyers at bay.

“So far, the growth in the economy has primarily led to increased apartment leasing and increasing rental rates,” said David Brown, who heads the Dallas office of housing analyst Metrostudy Inc. “Eventually it will lead to increased home sales.”

That may take a while, said Greg Willett, vice president at MPF Research Inc.

“The renter-by-choice group does seem to be getting bigger on both ends of the spectrum,” Willett said. “Young adults are delaying purchases, and older households are coming back into rentals.”

Thousands of Texans who’ve lost their homes in the last few years have also returned to the rental market. And younger residents worried about job security and falling home values have less urgency to buy.

“I don’t think there is a long-term shift in the real desire for home ownership,” Willett said. “It’s just not the right time now.

“So many people have been delayed in their careers during the recession, and it’s going to take a long time to recover financially.”

For apartment developers and landlords, the change in attitudes about renting has been a godsend.

While the home construction market has continued to languish, starts of apartments have boomed in recent months.

And apartment developers are building for the new market.

“The median-priced single-family home is now actually a step down in quality from what you have in these new apartments,” Willett said. “Comparing the typical new apartment vs. the typical house in D-FW, the apartment is nicer.”

But renters are paying more for the new goodies that apartment developers offer.

The average monthly rental rate for a new apartment in D-FW is close to $1,200 a month.

That’s more than the current mortgage payment on a midpriced home in the area.

Even so, apartment landlords are getting significant rent increases.

Average monthly rents in the area have increased about 3 percent in the last year and are likely to rise an additional 4 percent or more in the year ahead, Willett said.

“For the next couple of years, the danger of pushing people out of apartments into home purchases with higher rents is still pretty small,” he said. “But in Texas, you can’t keep that up for a decade.”

Apartment developers say they aren’t worried about pricing renters out of their units.

“I think there is still plenty of upside in rents before we start losing a meaningful amount of renters to home buying,” said Todd McCulloch, development director with Wood Partners, which built the Alta 1900 Lofts and other luxury apartment projects in Dallas. “Today’s rents, while rising, are still off of where they were a few years ago.”

For some renters, the prospect of rising costs outweighs the hassle of selling a house.

Taylor Garrett, who has lived in one of Wood Partners’ Dallas Design District projects for about a year, said he likes the luxury lifestyle and flexibility of renting.

“I will probably eventually buy a place,” said Garrett, who at 27 is a political campaign consultant. “But I don’t want to make a commitment now – I’m not grounded.

“I like having the ability to pick up and leave.”

If his career takes him to another market, not owning a home will be a plus.

“If I have to move, I’d have to sell it or lease it,” he said. “It’s so much easier for me to rent a place and not have to deal with that headache.”