Again you have to thank BUBBLE ben bernanke and QE 1 QE 2 and QE 3 for the reasons today and the years ahead that rent affordability is going to drop. This will continue to happen as long as rates stay at zero % and the fed keeps pumping the economy with worthless trillions, but some on here would disagree that the fed and their Trillion dollar programs to prop up the economy has nothing to do with this headline of course little do you know that it has everything to do with it. http://finance.yahoo.com/news/rent-...ver-next-two-years--zillow-ceo-143648411.html A new report from Zillow shows that rents across the U.S. are increasing, and not just in the expected regions of New York City, San Francisco and Boston. Overall, rents increased 3.3% year-over-year as of January. But many cities outpaced that, including Kansas City, which saw rent grow more than double the national average, jumping 8.5% year-over-year. St. Louis saw rent increase by 4.5% over the same period. Rents in Detroit grew by 5.0% and rents in Cleveland grew by 4.2%. Nationwide, rental appreciation is still below its peak - 6.3% hit in September 2012 after the housing bust. According to Zillow, monthly rents have grown at roughly twice the pace of wages in the U.S. since 2000. That means Americans are having to spend a greater share of their income on rent - about 30%, versus 25% in the past. And this problem isn't likely to go away anytime soon. Zillow surveyed a number of economists and real estate experts who all said they expected rental affordability to continue to "deteriorate for the next two years."
It's simply supply and demand. Fewer people are able to get a mortgage to buy a home due to continued tight credit requirements. Therefore, they must rent. Here in the DC area, they are building lots of apartments because the median home price is so ridiculously high. I think many more people are also turning to renting in areas where there is limited home appreciation, because the cost of maintaining a home is too high as well. The entire housing market may need a readjustment, which could be quite painful to the economy. Time will tell.
House prices should of sunk like bricks, sadly all the low interest rates and bail outs and sticking our head in the sand some how has stopped this normal correction. It's going to get MORE sucky for sure!!
For most people without the appropriate level of down and good credit, then yes, they must rent. 20 years ago it was 1995 and in a lot of places there were most likely still reasonably affordable housing opportunities out there. Wages haven't kept up and we still haven't recovered post 2008 (which isn't a surprise as endless QE and low interest rates are just a hack).
How nice to read a moderate sensible comment here on ET which is surely the bowels of "Gee Whiz" America. I liked your mention of maintenance cost! Both maintenance and insurance have increased with inflation and even more in some cases. These costs are not deductible for the home owner but are for the landlord. Renters, on the other hand, have low insurance and no maintenance cost. It is from the middle economic rank that the bulk of home buyers has come in the past. We, in the U.S., began shrinking the middle class ranks beginning sometime in the 1980s, due in large part to the virtual elimination of progressiveness in the income tax structure, only much later to be partially restored. Loss of progressiveness compounded slowly over time, resulting in a redistribution of wealth from the middle class upward. We can see a tell tale sign of a shrinking middle class, forced more and more to lean on credit, in the mortgage turnover rate. It has declined from 7 to 5 years. This is yet another factor less favorable, because of transaction costs, to buying. The affect of a shrinking middle class on home buying was delayed by the virtual elimination of underwriting standards during the "go go" years, when business and banking interests combined forces to lobby for absurd capital gains breaks for house flippers. There were few complaints from either the real estate industry or the mortgage bond securitizing firms regarding mortgage underwriting. The failure to regulate what cried out for regulation -- transgressions were widely known -- can fairly be laid directly at the feet of the Greenspan Fed, and particularly Greenspan's, who, as the Chief Regulator, did not believe in regulation! The decreasing quality of MBSs, known to insiders but hidden from buyers of the securities, fueled rampant sales of bond insurance policies, cleverly named "swaps" to avoid regulation. The R-rated Video from these days is titled: "Investment Bankers Gone Wild". Now that underwriting standards have returned to normal, the American demographic shift has been unmasked. Prices reached during the go-go days, like a bad hangover, will not quickly go away. Real estate prices are notoriously sticky. Eventually, either prices will come down or inflation will have caught up with them. In the meantime, the lower middle class, what there is left of it, will find it financially unattractive to buy, despite historically low interest rates. These would be buyers, if only they had some capital saved up, will be served instead by tax-break-favored investor owned rental property, whose financials look more favorable, to the investors at least, in a low yield environment. The U.S. has primarily a service/consumer economy. A financially healthy consumer is necessary for sustainable American business profits. When Business focuses only on short run profits without considering where its future customers are to come from, it is headed for trouble. If the present economy is to be sustained, let alone be invigorated, the supply of financially healthy consumers must be replenished. There are measures that were immensely helpful in building a strong middle class, and would still be immensely helpful in replenishing it now. Immediate measures that are necessary but not sufficient would be a rise in the Federal minimum wage and a restoration of progressiveness in the income tax. Over time other, even more politically difficult, changes in direction would be needed. The bedrock on which the U.S. republic rests, currently quite uneasily, is its public education system. We had the best of intentions when we broke it in the 1960s, we can't now seem to fix it by simply returning to what worked well. Instead we want to begin an expensive and unnecessary dual, publicly financed system, with both charter and "other schools". It is absurd that no one, besides myself I guess, has recognized that these charter schools are just a cloaked means of returning to tracking (OK, de facto tracking then) without getting into trouble by calling it that. I'm waiting for some bright politician to stand up and say: "I have an Idea, why not just convert all the other public schools to charter schools and expand them to include strong programs in vocational ed. Then create a separate school for the kids that can't, or won't, make it in the regular schools." Well, kudos to that yet to be discovered politician. If we were to follow their advice, we'd be right back to 1945, and everything would work well, like it did once long ago prior to the Great Society. The only barrier to doing something so simple and eminently sensible is the invention of a politically acceptable term that means "tracking" without saying it. Wall Street could help. After all Wall Street came up with "Credit Default Swap" to mean "bond insurance policy". And that worked!