By Dawn Wotapka and Robbie Whelan Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Apartment operators have long been considered big beneficiaries of the housing bust. But one leading industry analyst thinks that rental homes are the post-housing crash world's real stars. In a lengthy research note, Zelman & Associates argues foreclosures are primarily shifting occupants to single-family rental homes. "The benefit of a changing homeownership rate may not be as directly beneficial to the multifamily sector as many believe," the firm writes. Five years into the housing bust, fewer Americans are homeowners, either by choice or by necessity. In the first quarter, 66.5% of Americans owned homes, down from 67.2% a year earlier, according to the Census Bureau. During the heyday, when easy credit made mortgages available with less regard for income or ability to pay, the ownership rate surged to near 70% 2004. Each percentage point represents about 1 million households. Many people assume that, following a foreclosure, home owners move into apartments. Indeed, the sector has seen occupancies and rents rise in recent quarters and operators expect even better times ahead. That's put pep in shares of apartment real-estate investment trusts: Equity Residential (EQR), the largest apartment player by market capitalization, and AvalonBay Communities Inc. (AVB) have gained more than 17% since January. Camden Property Trust (CPT) has spiked 20% this year and nearly 60% in the last 12 months. Apartment owners say the foreclosure crisis is sending tenants to their doors. "We have a significantly higher number of people today living in our apartments who have lost their homes than I ever remember," says Jeffrey Friedman, chief executive of Associated Estates Realty Corp. (AEC), an Ohio-based apartment owner. "They don't put their cars in the garage, they put their belongings in the garage." The sector has also benefited because fewer residents are moving out and people who downsized with roommates and parents during the downturn are moving into their own places. But the single-family rental market has also grown rapidly in recent years, helped by families who might feel squeezed in an apartment. In the last few years, investors have been snapping up distressed and foreclosed homes and renting them out, dramatically increasing the supply of rental single-family homes. The number of single-family rental households spiked 21% from 2005 until 2010. In Nevada, Florida and Arizona--all markets hard-hit by foreclosures--the growth of single-family residential over apartment rental is even more striking. Between 2005 and 2010, the number of families renting homes grew 47.6%, compared to a growth rate of just 0.6% in traditional apartments. About one in three rental units is a single-family house, the report says. Zelman's figures come from analysis of U.S. Census data. "Conversations about housing often settle around single-family versus multi-family and owning versus renting, and, in many cases, single-family is incorrectly associated with owning a home while multifamily is used interchangeably with renting," Zelman writes. "Our data suggests that marriage, children and number of residents more directly determine the type of housing individuals or families choose." To be sure, each decision has positives and negatives. Apartments could include neighbors with loud children or blaring music. But then, single-family landlords are often investors who may or may not make good property managers. "You could get people who won't return your call," says Alexander Goldfarb, a REIT analyst Sandler O'Neill + Partners. -By Dawn Wotapka, Dow Jones Newswires; 212-416-2193; dawn.wotapka@dowjones.com
