U.S. home rental prices continued to climb at a modest pace in December, but rapidly escalating costs in cities such as San Francisco and Denver suggest that renters are facing more financial pressure. As a result, the share of Americans who own their homes has slipped to 64.4 percent from a peak of 69.2 percent in 2004. Because fewer Americans can afford to buy a home, demand for apartments and rental houses has pushed up rental prices.
Arturo Breton and Aurelio Medina consult their
smartphones during an apartment rental search.
“We do not have affordable rental housing resources to meet the demand,” said Barry Zigas, director of housing policy at the Consumer Federation of America, at an industry conference last week.
“Studies show that rental prices have risen 52 percent since 2000, while incomes for renters have only increased 25 percent,” said Stan Humphries, chief economist at Zillow. The higher costs make it difficult for renters to save for a down payment, which then causes them to rent for a longer period of time and delay any potential home purchases. “You don’t have to be a housing economist to see that there is a problem there,” Humphries said.
U.S. News & World Report tells MHProNews that in 2014, the share of first-time homebuyers fell to its lowest level since 1987, according to a recent report from the National Association of Realtors. Even though home prices are rising less quickly, high rents – compounded with substandard salaries, student loans, and other kinds of debt – make it difficult for younger renters to save enough for a down payment on a first home.
“In expensive markets in California and elsewhere, both home buying and renting have become less affordable in the housing recovery. Prices and rents have both risen faster than wages,” says Jed Kolko, Trulia’s chief economist. “Those big increases in rents make buying look more attractive, but at the same time, it makes it harder to save for a down payment if you’re spending more on rent.”
Recently, rents jumped 15.4 percent in the San Francisco area to a median monthly cost of $3,031, an increased mirrored by San Jose where prices were up 14.5 percent to $3,187 a month. Rents climbed 10.5 percent in Denver to $1,817 a month. Kansas City also saw a substantial 8.5 percent gain to $1,204 a month.
Other cities seeing substantial rent increases included Miami, Los Angeles, New York, and Oakland. In all of those cities, the median monthly rent for a two-bedroom apartment ate up at least 49 percent of a person’s income. For rent and utilities to be considered affordable, they are supposed to take up no more than 30 percent of a household’s income. Unfortunately, that goal is increasingly unattainable for middle-income families as a tightening market pushes up rents ever faster, outrunning modest increases in pay.
The strain is not limited to the usual high-cost cities like New York and San Francisco. An analysis by Zillow, the real estate website, found 90 cities where the median rent — not including utilities — was more than 30 percent of the median gross income.
Nationally, half of all renters are now spending more than 30 percent of their income on housing, according to a comprehensive Harvard study. One of the most expensive cities for renters is Miami, where rents, on average, consume 43 percent of the typical household income.
The New York Times tells MHProNews that Stella Santamaria, a divorced 40-year-old math teacher, has been looking for an apartment in Miami for more than six months. “We’re kind of sick of talking about it,” she said of herself and fellow teachers in the same boat. “It’s like, are you still living with your mom? Yeah, are you? Yeah.” After 11 years as a teacher, Ms. Santamaria makes $41,000, considerably less than the city’s median income, which is $48,000, according to Zillow.
Even dual-income professional couples are being priced out of the walkable urban-core neighborhoods where many of them want to live. Stuart Kennedy, 29, a senior program officer at a nonprofit group, said he and his girlfriend, a lawyer, will be losing their $2,300 a month rental house. Since they found the place a year ago, rents in the area have increased sharply.
“If you go by a third of your income, that formula, even with how comfortable our incomes are, it looks like it’s going to be impossible,” Kennedy said.
As rents increase in the tightest markets, many people are discovering that living on their own is proving unaffordable, forcing them to double up again. Arturo Breton, a 37-year-old waiter in Miami Beach, said that after years of living on his own, he was joining forces with a roommate who works as a manager at J.C. Penney. “I’ve come to the conclusion that in this country, it’s easier for two people to pay the rent than for one person,” he said.
In many markets, buying a home is considerably cheaper than renting, and Miami is no exception. However, many people are shut out of buying because their income is too low, they don’t qualify for a mortgage, or they are burdened by other debt. In 2008, a quarter of rental applicants were still paying off student loans, according to CoreLogic, but as of last fall, half of them were doing so.
Steve Gunn, 25, the marketing director for a Miami real estate brokerage firm, said he could certainly afford an apartment on his salary of $52,500, if he weren’t paying more than $800 a month in student loan debt. Instead, he commutes 90 minutes to work. From his mother’s house. ##
(Photo Credit: New York Times)
Article Submitted by Sandra Lane to – Daily Business News- MHProNews.
