Senior Director of Economic Research, Svenja Gudell, for Zillow, an online real estate database company, recently reported that rental affordability is getting worse, and is likely to remain the same without a change. “We will continue to see rental increases and affordability will worsen before it gets better.”
Income has not kept up with the rental increases. More of your monthly income is now being spent on rent and is a big concern. This is a national epidemic, not restricted to a local market or big cities. Rents have been soaring so high they are even outpacing home values! Places that were affordable are growing more quickly. An unbelievable fact is that there is a shortage of available rentals.
Seattle, San Francisco and Denver have been hit the hardest. These markets are having a difficult time keeping up with the demand for more rental buildings. As you can see, even with the higher rental costs, there is still the strong demand for rentals and is creating a housing crunch in some cities.
Low mortgage rates make purchasing a home very attractive, but with the rising rental rates, it is becoming more difficult for potential homebuyers to save money for down payments and other costs. Frustrations remain high when a renter sees approximately 30% of their income is spent on rental costs, while homeowners statistically pay 15% of their income on their mortgage payment. Those living in a high-income area are paying nearly 50% of their income on rents.
Low and middle income renters are feeling the pressure of rising rental costs the most. Unfortunately, it appears that new rental construction is being targeted for the high-end and luxury renters. Building is not proportionate to the renters that need a place to live.
CNN Money reports, http://cnnmon.ie/1MlCJj5, the rising rent prices as a percentage in some of the most popular cities, just to name a few, over the last year:
Denver-11.6%, Charlotte-6.6%, San Francisco-14.9%, Austin, TX-6.2%, Atlanta-4.9%, and New York-3.4%.
Today, inventory of available homes is limited and rental construction slowed down considerably when the housing crisis halted new construction. Now that the housing market is slowly recovering and the economy is showing more confidence, the rental properties are at a minimum. Building more rental units will clearly make the rental costs go down, but the average time for building may take up to two years to complete. Relief is not immediate. Thus, the law of supply and demand prevails.
Families paying 50%, 60% and 70% of their household income indicate that this rental fever is not going away anytime soon. Many renters who have long awaited the American Dream to be a homeowner will need to wait even longer, with the hopes that the low interest rates today will remain unchanged in the future.
Is there a solution to this crisis of rising rental costs and what can you do as a renter? If wages and employment opportunities improve, it may be a small solution to help ease the cost of renting. Be proactive and consult myself or my team who can assist you with providing ways of saving for your home purchase. Call today at (770) 888-2232 or clickhere to complete our contact form to get started!
Gary Welch and Jeff Morris are Atlanta mortgage bankers who are able to help you choose a mortgage solution that combines the right down payment, monthly payment and tax benefit for your needs. More information pertaining to industry related news can be found on our blog at loanstarteam.com/blog.