LOS ANGELES—Tuesday's announncement that New York-basedalternative asset management firm Premium PointInvestments was making its first foray into the rental housing sector,via a majority stake in Atlanta-based Residential CapitalManagement, helps illustrate the continuing appeal thatsingle-family rentals hold for investors. And a new report fromCBRE Group, headquartered here, makes the pointthat the dynamics fueling the sector's growth will be with us forawhile yet.

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“It has now been 10 years since thehomeownership rate peaked in the United States,” according to thereport, prepared by Gleb Nechayev, senior managingeconomist with CBRE Econometric Advisors. “Therate has dropped by more than 450 basis points since then, andrental demand has grown by more than 7.5 million households—morethan in any other decade over the past half century.”

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The shift from hme ownership to rental, hewrites, “has been so dramatic and persistent that it increasinglylooks and feels more like a structural change than a prolongedcyclical one. While it can be debated how much further we might seethe rate drop, homeownership currently faces a number of headwindsthat make a shift back toward owning unlikely in the near term.”

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Stirring up the headwinds, Nechayev writes, arefactors ranging from slow recovery in employment after the GreatRecession to “long-term socio-demographic shifts that include alarge population of baby boomers approaching and enteringretirement, and large numbers of echo boomers, or Millennials,joining the labor force and beginning to form households. Newpatterns of consumer behavior in the wake of severe shocks tohousing and the economy further complicate the picture.”

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The bright side to all this, however, is thatthe US labor market, which has now fully recovered the job lossesit sustained during the Great Recession, has been in expansion modefor the past several months. “With incomes and home pricescontinuing to rise, one can expect that a steady drop inforeclosures and increased activity among the first-time homebuyers will eventually help owner demand resume its growth,” writesNechayev.

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However, it's dificult to say whether this wouldbe enough to stabilize the homeownership rate in the coming year.“The job market and income growth for younger workers would likelyhave to improve much more quickly than they are anticipated to, andcredit standards would need to ease,” according to Nechayev.

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While the shift away from ownership has been aboon to multifamily, “the main beneficiary of this trend hasactually been the single-family rental market, which has expandedrapidly in recent years,” Nechayev writes. Single-family homescomprised 35.1% of the rental market at the end of 2013, up from30.8% in 2005.

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How much of rental demand growth's upsidepotential is captured by multifamily properties will depend on howcompetitive their rents over the next 12 to 24 months. That's true,writes Nechayev, “not only in relation to the costs of buying asingle-family home or a condominium, but also in relation tosingle-family and condominium rents, particularly in markets thathave experienced high volumes of residential sales to investors inrecent years.”

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The report predicts that rental demand shouldremain “robust” in the near term, thanks both to a relatively weakfor-sale housing market and an increase in total householdformation. However, Nechayev cautions, “with rents also risingrapidly, it will not be long before young households become moreselective and begin exploring the possibilities ofhomeownership.”

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.