We’ve all heard or read recent stories about the astronomically high rental rates in hotspots such as San Francisco, New York, and Denver but apparently the problem is a bit more widespread than we thought.
According to a report from Zillow last quarter, buying a home is becoming a better bargain than renting one in most metropolitan areas in America. In fact, the report found that in 94 of the country’s largest metros, renting is more expensive than buying and that on average, renters spend nearly 30 percent of their income on rent compared to buyers who spend 15.3 percent of their pay on mortgages.
The chief economist at Zillow claims that rising rents, interest rates, and home values coupled with uncertain job prospects and student loan debt is making it difficult for renters to save for a down payment and attain home ownership.
So how did we get to this point? An article in The Real Deal points to the uptick in number of all-cash home buys and to the fact that rental prices didn’t drop much during the financial crisis leading to steady rent increases as the economy struggles to recover.
So how do we get past it? Zillow’s chief economist believes that “in order to combat this phenomenon, wages need to grow more quickly than they are…and growth in home values needs to slow.”
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