Tags: Trulia | rent | wage | home

Consumer Bind: Rent Increases Outstrip Wage Gains

By    |   Thursday, 06 November 2014 02:45 PM

First Americans couldn't afford to buy homes. Now they may not be able to rent them.

Rents have risen 7.8 percent during the past year in the five least affordable markets, according to real estate information service Trulia. Meanwhile, average hourly wages increased only 2 percent in the 12 months through September.

Moreover, nationwide, rents for units currently listed rose approximately 6 percent from a year ago.

"Rents are rising because of strong demand that supply hasn't kept up with. Nearly all the new households are renters, and young people moving out of their parents' homes will keep fueling rental demand," Jed Kolko, chief economist at Trulia, told CNBC.

"Both rents and [home] prices are outpacing income growth, so neither renting nor buying has become more within reach of what people can afford. Plus, paying more on rent makes it harder for would-be homebuyers to save for a down payment."

The rule of thumb is that renters shouldn't devote more than 30 percent of their salary to housing, but renters in six major cities — San Francisco, San Diego, Boston, Baltimore, Chicago and Washington, D.C. — pay more than that for two-bedroom apartments, according to Trulia.

Meanwhile, the Census Bureau issued a report this week saying that home ownership has fallen to a near-20-year low of 64 percent. Ownership among millennials, those younger than 35, dropped to 36 percent.

"It's hard for them to believe that owning a home is the best way to build wealth anymore," RealtyTrac spokesman Daren Blomquist told CBS News. "They've seen in some markets, home prices went down 30, 40, 50 percent during the housing bubble and the burst."

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First Americans couldn't afford to buy homes. Now they may not be able to rent them.
Trulia, rent, wage, home
Thursday, 06 November 2014 02:45 PM
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