One of the most economically potent, but least-documented, segments of the American home real-estate market is stirring this summer.
New, unreleased national studies reveal that families who rent single-family houses and condominiums are far better heeled, far more numerous than many analysts believed--and highly likely to buy a house in the early phases of this economic recovery.
Preliminary estimates from the Census Bureau indicate that upwards of 9 million families across the country now rent single-family homes.
That number swelled significantly during the tough economic years 1980 through 1982, according to a private real-estate firm that has just conducted a major survey of the occupants of those houses.
Epic Realty Services Inc. of Falls Church--the largest manager of single-family rental houses and condos in the country--polled its nearly 6,000 tenants in 32 states and came up with some eye-opening results:
* The economic jolts of the past several years--from plant closings to high interest rates--have forced large numbers of families who would otherwise be homeowners to turn into renters instead.
Two out of three of those "postponed purchasers," however, now are poised to jump from rental to ownership--provided that rates stay in their current range or below.
* Although apartment renters typically have income profiles substantially below those of homeowners, the people who live in the nation's single-family rental homes are an upscale group.
Nearly 40 percent of the rental home tenants in Epic's units have gross family incomes of $35,000 a year or more. The nearly 6,000 homes in the survey range from tiny, low-cost condos in Denver and San Antonio to $100,000-and-up properties in the surburbs of cities such as Washington, Dallas, Philadelphia and San Diego.
* Far more residents of rental homes and condos are former homeowners--people displaced temporarily by divorce, business reverses and relocations--than real estate analysts previously believed.
Census bureau data confirm that at least one out of every three home renters today was a homeowner at his last address. More than 60 percent of Epic Realty's renters say they were homeowners at some point in their past. These displaced people don't have the capital to buy a home, says Eugene Isaacs, president of Epic Realty Services. "But they're absolutely determined to hold on to a living environment as close to their former standard as possible.
"That's why they rent a whole house--even if it drains them financially."
* Rents for houses and condos are moving up more rapidly than inflation--10 to 12 percent a year is not uncommon--putting additional pressure on tenants in most markets to join (or rejoin) the ranks of homeowners sooner rather than later.
Rents that tenants pay per square foot are significantly lower across the country for detached, single-family homes than for rental condominium units.
The average detached single-family home renter pays $507 per month for a home with about 1,433 square feet.
That works out to rent payments of 35 cents per square foot per month.
Tenants in condominiums, by comparison, typically pay one-third more per square foot for their space.
Average condominium rents throughout the country in Epic's study were $474 a month for a unit with 1,016 square feet. That comes to 46 cents a month for every square foot of space.
* Rents for single-family homes in several metropolitan areas are absolute bargains by national standards.
Washington, for instance--which is possibly the most active home rental area per capita in the country--offers the lowest-cost monthly rents relative to the resale value of the homes involved.
Typical rents in and around Washington represent 0.64 percent per month of the appraised resale value of the house. An $82,600 suburban rental house, in other words, will command $532 a month in rent.
In areas with tighter single-family rental supplies, by comparison, one month's rent often approaches or exceeds 1 percent of resale value.
In the Philadelphia-Southern New Jersey market, for example, a $50,000 house in Epic Realty's management portfolio typically commands $517 a month--nearly as much as that for a house valued $30,000 more in the Washington area.
"That's great for the investors who own those homes," says Isaacs, "But it increases the pressure for tenants to buy their homes rather than renting."