Rents are growing FASTER than incomes
Rental growth is outpacing income increases across the country, adding to the financial strain on tenants.
Average rents have risen 134.9 percent since 1999, while incomes have risen 76.8 percent over the same period, according to data from Moody’s Analytics.
The big difference — driving up the cost of living for renters — comes amid a separate study showing there are only four states in America where average mortgage payments are cheaper than rent.
The Moody’s Analysis showed that by 2022, the share of U.S. household income needed to rent a mid-priced apartment will exceed 30 percent for the first time in 25 years of tracking the trend. The benchmark, called rent-to-income ratio (RTI), fell slightly to 29.6 percent at the beginning of 2023.
The studies follow research published by DailyMail.com on Wednesday that found Hawaii to be the least affordable state to live in the US.
A study by Moody’s Analytics found that seven metropolitan areas have average rent costs that are at least 30 percent of the median salary, increasing the cost of living for renters
Separate research by Refin found that only four metropolitan areas in the country have average mortgage prices below average rents. The four areas where mortgages are highest compared to rents are all in California
There are now seven metropolitan areas in the country where RTI is over 30 percent:
- Los Angeles: 36% RTI; average rent $2,456
- Miami: 42% RTI; average rent $2,141
- Palm Beach: 34% RTI; average rent $2,051
- Fort Lauderdale: 37% RTI; average rent $2,108
- New York: 68% RTI; average rent $4,334
- Boston: 33% RTI; average rent $2,948
- Northern New Jersey: 33% RTI; average rent $2,416
Separate research Redfin found that there are only four major metropolitan areas in the US where estimated monthly mortgage costs are less than estimated monthly rental costs.
In Detroit, Michigan, mortgages are about 24 percent lower than rents. In Philadelphia, Pennsylvania, the difference is 6.6 percent.
In Cleveland, Ohio, the average mortgage is 3.9 percent cheaper and in Houston, Texas, 1.2 percent.
At the other end of the scale, the four places where mortgages are highest compared to rents are all in California.
In San Jose, the median mortgage of $11,049 is a whopping 164.6 percent more than the median rent of $4,176.
In San Francisco, the median mortgage is $10,892, compared to the median rent of $4,552 — a difference of 139.3 percent.
In San Jose, the median mortgage of $11,049 is a whopping 164.6 percent more than the median rent of $4,176
In San Francisco, the median mortgage is $10,892, compared to the median rent of $4,552 — a difference of 139.3 percent
In Cleveland, Ohio, the average mortgage is 3.9 percent cheaper than the average rent
That’s followed by Oakland, where rents average $3,700 but mortgages $7,376 — a 99.4 percent difference.
And in Anaheim, the difference is 91.5 percent — with mortgages averaging $7,892, while rents are $4,122.
Taylor Marr, Redfin’s deputy chief economist, said: ‘Buying a home often makes more financial sense than renting if you can afford a down payment and a monthly mortgage because you’re building equity.
“If you own your house, your house pays you; when you rent, you and your home pay to your landlord
‘But buying is not feasible for everyone. Some people move around a lot, so renting may make more sense because they won’t be living in their home long enough to build equity.
“Many others simply don’t have the money for a down payment – a situation that is becoming more common due to rising mortgage rates and rising home prices.”
The studies follow an analysis by storage company Pink Storage that found Hawaii to be the worst performer in America when analyzing how household incomes by state have not kept up with real estate prices.
Hawaii was followed by California in second and New York in third.
The study, which used data from the Zillow real estate platform, compared household incomes in each state to average real estate prices and calculated how much families would have to pay for their monthly mortgage.
Another study labeled Hawaii as the least affordable place to live in the U.S. as average income earners failed to keep up with real estate prices
But West Virginia came out as the most affordable, with couples paying an average of just $952 a month on their mortgages
It found that homes in Hawaii now cost $831,629, while collective incomes have stalled at $132,629.
It basically means that a mid-wage family is priced out of the tropical haven, as a house with a 3.5 percent down payment would ultimately cost them $5,930 a month in mortgage costs. This is based on an interest rate of 6.96 percent.
This would not be possible under US borrowing rules, which means homeowners can only take out a mortgage that would cost less than 28 percent of their monthly income.
In Hawaii, 28 percent of the median income would be $3,090 a month — nearly $2,000 less than what they would need.
And single people looking to buy a home in Hawaii are even worse off, as the median solo income is only $66,220.
The second least affordable place to enter the real estate market was California, where homes cost about $728,121.