Since the recession, about 3 million U.S. homes have been converted into single-family rentals, a one-third increase.
Nevertheless, when prices do reach past peak levels, they’ll still be about 20 percent below that level in inflation-adjusted terms, he said.
Lawrence Yun, chief economist of the National Association of Realtors, expects median home prices to grow 7 percent this year and 4 percent the next.
Still, supply remains tight across the country, Yun said, partly because investors have bought up houses and have not released them into the market, and partly because builders have not created supply quickly enough to meet demand.
However, he projected housing starts would rise from 1.1 million this year to 1.4 million in 2016.
David Crowe, senior economist at the National Association of Home Builders, said that reluctance to sell an existing home has had an impact on builders. “New home sales come primarily from existing home sellers,” Crowe said. He expects single-family starts rising from 726,000 this year to 935,000 in 2016.
But builders are still recovering from the recession, and are being further squeezed by higher labor and land costs. Plus, some small and regional builders are having a tough time getting credit through small community banks.
All this means higher prices for homebuyers. But renters have been hit by big price bumps, too.
Stan Humphries, chief economist at Zillow, quoted May statistics that showed rents rising 4.3 percent year over year, while home prices rose only 3.3 percent.
Millennials just leaving their parents’ basements, former homeowners who lost their homes to foreclosure, and slow wage growth are all fueling the demand for rentals, he said.
But many are renters out of necessity, not choice, he added, and are giving up basics like trips to the doctor and dentist just to keep up with their rising rents.
“The popular belief is that millennials don’t want to buy homes, but our research shows the opposite,” he said. “They’re more like the silent generation. Their biggest problem is down payments, but since rents are so high, it’s hard for them to save up.”