There are 9 million more renters in the U.S. than a decade ago, the biggest jump on record. As rental demand continues to outstrip supply and median income growth lags behind rental inflation, more homebuyers are citing high rent prices as their biggest motivation for purchasing a home.
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A Redfin survey found that in the first quarter of 2016, one in four homebuyers is looking to purchase because their rent is too high. This is up from one in five in November and up from one in eight in August 2015. Expensive rent is the second biggest reason for motivating homebuyers to purchase, next to a major life event, such as a the birth of a child or marriage, according to Redfin.
Though Zillow’s Rent Forecast was calling for rental rate bumps to slow in 2016 (with a prediction of a 1.1% increase for the year), renters are still feeling the effects of 2015 rental rates which increased faster than any time since 2007, according to real-estate research company Reis Inc.
Other rent forecasts are not as optimistic as Zillow’s. RealtyTrac’s Rental Affordability Analysis Report predicts that across all 504 counties analyzed, average wage earners will spend 37% of their income on rent for a three-bedroom property in 2016.
Furthermore, the Harvard Joint Center for Housing Studies says that if both rent and income grow in line with a rate of 2% inflation, the amount of severely burdened renters (people spending over half their income on rent) will still increase by 11% by 2025.
Currently,mortgage rates are still hovering near historic lows and several loan options are available that make homeownership, down payments, closing costs and mortgage insurance more affordable and accessible than ever.
If you’re interested in getting out of the rental circuit, download our free Mortgage 101 Handbook for everything you need to know about buying and financing your first home.