Renting is More Expensive Than Ever in Many U.S. Metros
Image Renting is currently more expensive than ever in many areas in the United States, making it difficult for renters to save for a down payment on a home, according to a new analysis report.
Homes remain more affordable to buy in 94 of the country's 100 largest metros compared to historic averages. But renting is more expensive than ever in 88 of the country's 100 largest markets.
This comes as the latest Zillow Rent index shows that after three months of flat or negative monthly growth, national rents rose in July from the previous month.
It means that overall only a dozen are currently more affordable than they historically have been for both renters and home owners, as widespread growth in housing costs continues to outpace wage growth.
Nationally, US home values rose 6.5% year on year in July while national rents rose 2.8% over the same period. The Zillow Home Value Index rose to $174,800 in July, up 0.2% from June 2014 and 6.5% from June 2013.
The firm points out that rental affordability is currently much worse than mortgage affordability, largely because rents didn't experience the huge drop seen in home values during the recession, and instead have just kept climbing upward.
Nationally, renters signing a lease at the end of the second quarter paid 29.5% of their income to rent, compared to 24.9% in the pre-bubble period. In 88 of the nation's largest metro areas, renters should currently expect to pay a larger share of their income toward rent than they would have historically.
Thanks mostly to low mortgage interest rates, affordability of for sale homes looks much better. Buyers at the end of the second quarter could expect to pay 15.3% of their incomes to a mortgage on the typical home, far less than the 22.1% share home owners devoted to mortgages in the pre-bubble days.
As of June, home buyers in just six of the country's 100 largest metro markets analysed by Zillow were paying a larger portion of their incomes today than historically in order to buy their area's median priced home.
But mortgage rates are expected to rise in the coming year. When mortgage rates hit 5%, still very low by historical standards, the number of unaffordable metros for home owners among the top 100 will more than double, to 13. At 6% mortgage interest rates, the number of unaffordable metros will almost double again, to 24.
‘The affordability of for sale homes remains strong, which is encouraging for those buyers that can save for a down payment and capitalise on low mortgage interest rates. But the health of the for-sale market is directly tied to the rental market, where affordability is really suffering,’ said Zillow chief economist Stan Humphries.
‘As rents keep rising, along with interest rates and home values, saving for a down payment and attaining homeownership becomes that much more difficult for millions of current renters, particularly millennial renters already saddled with uncertain job prospects and enormous student debt. In order to combat this phenomenon, wages need to grow more quickly than they are, particularly for renters, and growth in home values will need to slow,’ he added.
The median annual income nationwide was $53,216 as of the end of the second quarter but according to the Census Bureau, home owners and renters have drastically different salaries with home owners making $65,514 per year, while the typical renter in the US making just $31,888.
In July, median US home values rose 0.2%, the slowest monthly pace of appreciation since February 2012. Looking ahead, for the 12 month period from July 2014 to July 2015, national home values are expected to rise another 2.7% to approximately $179,489, according to the Zillow Home Value Forecast.
Median US rents rose 0.6% in July from June to $1,318. The monthly spike in rents follows three straight months of flat or falling rents.
As rental becomes higher, Americans should start planning on buying their own homes. Prospective home buyers can look at property listings provided by some firms that use disruptive video marketing platforms. Realbiz Media Group, Inc. (OTCQB: RBIZ)is a Florida-based digital media company that develops proprietary video marketing software that agents and their brokers can use to promote their virtual tour listings online. The company offers a Virtual Tour Program that allows real estate sellers to create virtual tours and presentationsthat are optimized for mobile viewing and could be syndicated through social media for only $29.95 a month.
The program is equipped with a video search engine optimization (VSEO) tool that automatically generate meta tags and descriptions for virtual tours and listings agents have uploaded to the platform so that they would be found easily by consumers online.
The program also has tools for creating QR codes, e-flyers, and seller reports as bonus features.
For agents on the go, the company has also recently launched a mobile app called EzFlix, which makes creating listings and virtual tours on mobile phones easier. The app also utilizes Realbiz Media’s patented technology, which allows agents to create local community content, real-time videos, and add personalized messages to these items.
To learn more about Realbiz Media and its products, contact email@example.com call 1.888.REAL.BIZ (888.732.5249).
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.