More Americans to exit home ownership

Morgan Stanley completed and demographic study.

During the housing bubble, homeownership rates increased from 66% to 69%, an all-time high. Today, that number is just below 65%, according to Morgan Stanley researchers Oliver Chang, James Egan and Vishwanath Tirupattur.

The analysts expect this will decline further to 59.7%, driving multifamily vacancies down and rents up. The researchers derived this estimate by taking the number of delinquent homeowners likely to be foreclosed, and moving them into the rental category.

And the outlook

"GSE reform, Dodd-Frank securitization rules, mortgage interest deduction reform, continued home price declines and a long workout period for distressed homes, will likely make it harder to buy an owner-occupied home," the Morgan Stanley report states.

"As such, we believe that the U.S. will become a Rentership Society, in which the homeownership rate will keep falling, the home rentership rate will conversely rise, and the rental market will dominate the investment landscape in housing for years to come," according to the analysts.

They made clear the interpretation of their results are not necessarily equal to a negative outlook. They point to improvement to the multifamily sector as an example. However, performance of single-family dwellings, often owned by one landlord, are more difficult to project.

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