April rental price growth stood 3.7 percent higher than April 2015, which is the same 12-month increase rate for the 5th month in a row, according to MarketWatch via the United States Labor Department. More importantly, this is the highest year-over-year price increase since before the financial crisis.
So as the economy continues to improve, why are renters still feeling outstripped by rent prices?
Demand Is Outpacing Supply
According to the Housing Vacancy Survey, renter growth has skyrocketed by nearly 9 million households between 2005 and the third quarter of 2015, which is the largest increase over any 10-year period since 1965. Another 4.2 million renters are expected to enter the market by 2025, according to the Harvard Joint Center for Housing Studies.
The rental vacancy rate hit its lowest point in three decades in 2015, further boosting rental prices.
Renter Incomes Can’t Keep Up
Renter incomes still have not yet recovered from the recession. Though improving, the median renter income is still below the 2008 median and even lower than the 2001 median. According to the Harvard JCHS, if both rent and income grow in line with a rate of 2% inflation, the amount of severely burdened renters (those spending more than half their income on rent) will still increased 11% by 2025.
While rent is becoming pricier and is one of the biggest motivations for buying a home in 2016, mortgage rates are still near historic lows, making homebuying more affordable than ever. On top of low rates, 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 in 2016, download our free Mortgage 101 Handbook for everything you need to know about buying and financing your first home.