There is no price inflation if you don’t live under a roof…
A new report by Zillow, an online real estate database company, notes that United States consumers are paying the highest percentage of their income on rent than ever before.
The study released Thursday discovered that renters paid, on average, 30.2 percent of their income on rent in the second quarter. Between the years 1995 and 2000, renters had spent, on average, less than one-quarter of their incomes on rent.
Analysts say the figure is important because it highlights the fact that Americans’ rental burdens is surpassing the 30 percent mark, which is an important benchmark when it comes to affordability.
“Our research found that unaffordable rents are making it hard for people to save for a down payment and retirement, and that people whose rent is unaffordable are more likely to skip out on their own health care,” said Svenja Gudell, Zillow’s chief economist. “There are good reasons to rent temporarily – when you move to a new city, for example – but from an affordability perspective, rents are crazy right now. If you can possibly come up with a down payment, then it’s a good time to buy a home and start putting your money toward a mortgage.”
When it comes to the biggest metro areas covered by Zillow, rent affordability had diminished in 28 of the 35 cities. Here are some of the cities with the highest rent-to-income percentages:
– Los Angeles: 49 percent
– San Francisco: 47 percent
– New York: 41 percent
– Miami: 44.5 percent
– Denver: 35 percent
– San Diego: 44 percent
What’s the solution? Study authors say to purchase a house because of rock bottom interest rates. But even that’s difficult for a bulk of renters because of rising rental costs, stricter credit standards and stagnant wages. There are many challenges to receiving a mortgage, the report authors say.
“Recent market volatility is causing some lenders to be more cautious in their underwriting,” said Gudell in a press release. “Tighter mortgage access will make it harder for people with low credit scores to get a home loan, and even people who can get approved for a mortgage will have fewer options in terms of available mortgage products.”
Although rent is still rising significantly all over the country, some renters may decide to stay put in the end, hence the 25-year record-low vacancy rate.
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