Moody’s Investors Service analyst and director of commercial-mortgage backed securitization research, Tad Philipp, sees a negative side to the housing recovery.
In the latest cross-sector impact report, Philipp says the loss of renters to eventual homeownership may not promote long-term sustainability to all of the apartment buildings currently under construction.
In other words, apartment construction is accelerating despite signs that renter numbers are likely to start decreasing.
Moody’s states that the “construction of new homes and sales of existing home sales will rise steadily, and an ongoing rise in housing prices and housing starts will affect the credit quality of not just housing-related corporate entities, but also local governments, financial institutions, and securitizations,” in an email accompanying the report.
Currently the home ownership rate for young adults is 28%, Philipp notes, compared to a national average of 66%.
The 28% number will likely move closer to the national average as rising house prices incentivize on-the-fence potential borrowers.
The analyst report does not parallel other datasets on the topic.
However, the risk may not materialize, as Philipp writes.
“As the single-family housing market recovers, multifamily apartment demand will be sufficient to maintain moderate rent growth if the pace of construction remains in line with the rate of apartment absorption,” he said in the report.