In the past few years, an unusually large share of typical first-time buyers--married couples and younger households--have remained renters. Indeed, while the number of households aged 25-34 increased by 1 percent from 2007 to 2009, the number of households in this age group that bought their first homes fell 14 percent during this period.The number of first-time homebuyers in the 35-44 year-old age group fell even more sharply, down 21 percent. The trend among married couples is similar, with a 19 percent drop in first-time homebuyers despite no change in their overall numbers. With home values still falling in many markets, even would-be homebuyers appear to be waiting on the sidelines until they are convinced that prices have bottomed out.

 

But the improving economy and affordable home prices may be leading more renters to think about buying. The latest Fannie Mae National Housing Survey indicates that the percentage of renters saying they will probably continue to rent the next time they move declined to 54 percent in the first quarter of 2011, down from a peak of 59 percent in June 2010.

 

Meanwhile, recession-induced income and job losses have forced many former homeowners to turn to renting. According to CoreLogic, owners lost some 3.5 million homes to foreclosure from 2008 through 2010. Taking into account that some share of these properties were investor-owned, these foreclosures have displaced millions of renters as well. And although the number of delinquent loans is finally ebbing, the volume of foreclosures and short sales continues to rise as lenders work through a huge backlog of troubled loans.

Thus, many more owners will become renters in the coming years--and will remain so for some time as they build savings and reestablish their credit ratings.