Historic numbers of Utahns are renting their homes these days, a shift that has dramatically expanded investment opportunities in rental properties.
Salt Lake City is among the most attractive U.S. housing markets for making money by owning and renting out single-family houses and apartment complexes, according to several measures. That's been spurred by job growth, lifestyle changes and the fallout from a real estate crash-turned-foreclosure crisis that forced thousands of Utahs out of their homes.
Homeownership numbers and rental vacancy rates are both at historic lows in the Beehive State. Average rents now at a record high $883 a month for the greater Salt Lake area are ticking upward. Developers have announced new construction of at least 6,000 rental units and both private and institutional investors are pouring money into the market.
"It's a big trend," said Craig Burton, a principal at Equimark Properties in Salt Lake, a brokerage and research firm focused on the apartment sector.
One of the nation's leading property-management company's recently ranked Salt Lake ninth among 75 U.S. cities for its promise of good returns on rental investments. The ranking is based on vacancies, rent fluctuations, cost-to-return ratios, property appreciation and job growth.
The most important of those metrics is job growth, a spokesman at Seattle-based All Property Management said.
Utah's nearly 4 percent gain in jobs between 2012 and 2013 "is an astronomical number," said Jacob Colker, a senior vice president with the company. "It's an incredibly positive sign for a city to be that far out ahead of the rest of the country."
In fact, Utah's employment market grew at twice the national rate, with many of those more than 43,000 jobs paying moderate wages that steer earners toward renting. But rental demand along the Wasatch Front also reflects deeper demographic change.
The housing bust and resulting economic downturn pushed homeownership out of reach for many Americans, particularly new families. Nearly 76.2% of Utah residents owned homes in 2008; that measure had dropped to 71.1% just five years later, according to federal data.
Having watched their parents endure dramatic losses in home values or even foreclosure, increasing numbers of potential homebuyers aged 21 to 45 are opting to rent instead and remain more mobile and less financially encumbered.
"They're what we call 'lifestyle renters,'" said Burton as in, urban, young, able to relocate for new jobs and free of mortgage payments and responsibilities such as mowing lawns or cleaning rain gutters.
For some, the trends raise societal concerns.
Several studies indicate homeowners are more likely to build beneficial bonds with their communities than renters. Neighborhoods dominated by owners tend to have lower crime rates, higher student test scores and fewer divorces, one leading Utah home seller noted.
"We acknowledge there are good reasons why people rent, but home ownership still does matter," said Dave Frederickson, president of the Salt Lake Board of Realtors. "They've got some skin in the game, so to speak."
But rental property investments also have buoyed home prices, with a positive effect on the broader economy. Rental demand in Utah and across the country has not only captured the interest of developers, foreign investors and some of the big Wall Street firms, it also has earned astounding gains for local companies.
In 2007, three Brigham Young University graduates founded Peak Capital Partners, a Provo-based residential multifamily investment company, just as the U.S. economy tipped into what became the Great Recession. Their first venture was developing a 236-unit complex of student housing apartments on a piece of land next to BYU, known as The Village at South Campus.
Today, the firm owns 31 apartment communities in eight states, for a portfolio worth an estimated $425 million.
The company's strategy has targeted one-, two- and three-bedroom apartments for working-class families in urban markets away from the coasts and where the potential for new construction is limited, said Jamie Dunn, company founder and managing partner.
"If you're in a population center where everyone wants to be and offer pristine, well-maintained, well-managed properties,'' Dunn said, "you will always do well."
The firm also owns the Elk Meadows and Aspen Villas complexes in Park City and Meadowbrook Station in Salt Lake County's Millcreek area.
The company announced on Tuesday its purchase of The Artisan in southeast Denver, a 434-unit complex and its sixth major buy in Colorado. The Fannie Mae-backed deal is to be accompanied by millions more in capital improvements on the complex, including interior and exterior renovations and enhanced landscaping.
Now at 15 corporate employees, Peak Capital also recently moved its offices into the upscale Riverwoods development in Provo.
Said Dunn: "We are growing up."
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Source: Rental Property Management Health Index, All Property Management