Tag Archives: income
Rents overtake home values in the US, latest index shows
Residential rents in the United States grew 4% year on year in April, overtaking home values growth which was at an annual rate of 3%, the latest data shows. It means that rents grew at their fastest pace in two years in April, and surpassed home value growth in 20 of the 35 largest US housing markets, according to the data from real estate market report firm Zillow. Rents reached $1,364 and home values reached an average of $178,400 and growth in home values is expected to slow further in the second half of the year as the for sale housing market stabilises. The switch comes after years of rapid home value increases and has been boosted by the improving economy. The Zillow report points out that US home values peaked in 2007, and then crashed during the recession between 2008 and 2010. Since then, they have risen rapidly, returning to their peak levels in many markets. Home values have both risen and fallen over the past decade, but rents have been steadily rising. Indeed, rental growth has been outpacing home value growth for several months in some of the nation's hottest markets. In San Francisco, rents started rising faster than home values in July 2014, and have been growing faster ever since on an annual basis. In Boston, annual rental growth has outpaced home value appreciation since August 2014. The report points out that low mortgage rates have helped make buying a home much more affordable than renting. On average, US home buyers can expect to spend about 15.3% of their income each month on a typical house payment. Renters can expect to spend about 30% on a monthly rent payment. ‘There are tremendous incentives to get into home ownership these days: mortgage access is improving, interest rates are low, and home values remain below prior peaks,’ said Zillow chief economist Stan Humphries. ‘But it will be increasingly difficult for many renters to realize these benefits as this country's growing rental affordability crisis continues to worsen. More income going to rent means less going to savings for a down payment and other costs, keeping renters renting longer and feeding into the high demand that is contributing to rising rents in the first place,’ he explained. ‘This cycle will be difficult to break, and is a symptom of the imbalances that still exist in the housing market as we struggle to get back to normal. New construction and rising wages will help, but neither is coming very quickly,’ he added. Over the next year, home value growth is expected to slow even further, to 2% annually, according to the Zillow home value forecast. In 2014, home values rose 4.9%. Continue reading
US rents starting to outpace house price growth, new analysis shows
Residential rents in the United States are continuing to rise, up 3.7% year on year to $1,362 a month and keeping pace with house price growth of 3.9% over the same period. The latest data from real estate firm Zillow shows that in 17 of the nation’s 35 largest metro areas, annual rental growth exceeded annual house price growth in March. This is in line with expectations as the firm predicted at the end of 2014 that annual rent growth would outpace house price growth by the end of 2015. It now says this will happen well before the end of the year. But while overall home values in the nation as a whole may still be growing more quickly than rents, in many large metro areas, rental growth has surged ahead over the past year. Of the 17 metro areas where rents are growing more quickly than home values, the biggest differences are in San Francisco with rents up 14.8% year on year and home values up 9.6%. While in Kansas City rents are up 8.6% and price up 4%, and Pittsburgh it is 6.3% and 4.3% respectively. March represents the first month in two years in which annual home value growth was less than 4%. For 24 months, home owners have watched their homes appreciate at a pace well above historic norms at around 3% annually. According to Zillow rising rents themselves are a double edged sword for the purchase market. As current tenants see more and more of their income going to landlords that keep raising the rent, many are likely to opt for the relative stability of homeownership. And home ownership, in addition to offering stable payments over many years, is also an incredible bargain right now. Current US renters making the median national income can expect to pay about 30% of their income to afford the median US rental property, up from about 25% historically. Buyers, on the other hand, thanks to very low mortgage interest rates and home values that, for most local markets, remain below their pre-recession peaks and should expect to pay only 15% of their income on a mortgage, down from about 22% historically. The Zillow analysis also points out that homes to buy remain scarce, and those homes being built are often focused at the high end, and not at current renters that are likely looking to buy more entry level homes. Continue reading
Low housing supply in the US squeezing affordability
Rental affordability is as bad as it's ever been across the United States, in part because there are not enough new, affordable homes to meet demand, new research suggests. Overall, renters can expect to spend 30.1% of their income on rent, while home buyers can expect to spend about 15.3% of their monthly income on a mortgage payment, according to a study by real estate analyst Zillow. It also found that affordability is worst in fast growing cities that have fallen behind in building homes to keep up with population growth. The firm’s latest rental index is up 3.4% year on year to $1,355 per month while its property price index is up 4.9% to £178,700. Affordability is best in places that either have slow population growth such as Detroit or have met new growth by building new housing units. Chicago, for example, permitted 906 new housing units in 2012 and 2013 for every 1,000 new residents between 2013 and 2014. The index report says that in Chicago renters can expect to spend about 31% of their income on rent, while homebuyers there can expect to put 13.9% of their income toward house payments. It suggests that it is easy to see how San Francisco has become one of the country's least affordable housing markets. Zillow's analysis showed that for every 1,000 new residents, there were just 193 new housing units permitted. Residents of the San Francisco metro can expect to spend 44% of their income on rent, or 39.2% on a monthly mortgage payment. The short supply is no secret to policy makers. The mayor of San Francisco, for example, has pledged to add 30,000 housing units by 2020 and a Boston city report made a similar recommendation to meet demand with 53,000 new housing units by 203o. ‘As the economy continues to improve, more Americans are slowly moving off of their buddies' couches and out of their parents' basements into homes of their own, first likely as renters and then eventually as home buyers,’ said Zillow chief economist Stan Humphries. ‘Unfortunately, the supply of affordable homes, especially affordable rentals, is insufficient in many areas to meet this growing demand. As a result, the competition for those homes that are available can often be fierce, driving up prices and contributing to worsening affordability,’ he explained. ‘More construction will help ease the crunch, and getting a mortgage is also getting easier, which will help more current renters transition to home ownership and further ease rental inventory shortages. But these fixes won't happen overnight,’ he added. Since 2000, rents have grown at roughly twice the pace of incomes. Partially as a result, the percentage of Americans citing cheaper housing as a reason they moved to a different home has almost doubled since then, from 5.6% to 9.6% currently, according to the US Census Bureau. Over the past several years, renting, historically a budget minded choice, has become increasingly less affordable. Meanwhile, recovering home prices, along with historically… Continue reading
