“Renting is Now Twice as Expensive as Buying Houses in the US”

Poster Jay Yen recently wrote a brief article on a surprising and important new development in the real estate market:

“According to their recent affordability report,” wrote Yen, “in the third quarter of 2014, renters in the US were spending an average of 30 per cent of their monthly incomes on rent, while homeowners were spending just 15 per cent of their monthly incomes on their mortgage payment.

“These findings shed light on a major shift that has occurred in the US housing market over the past few years. In the years before the real estate bubble, between 1985 and 2000, rent was usually more affordable compared to buying houses, in most US cities. Now, in most American metros, if you can just come up with a down payment, you are much better off buying your own house than renting.

Since the US real estate market crashed in 2008, writes Yen, “rents have been on a steady upward trend across the country while the cost of buying a home has been falling in many parts of the country, to a point where renting is now the less affordable option — sometimes by a huge difference. This trend of renting being half as affordable as buying a home is one of the reasons why many housing marketing experts believe 2015 will be the year that most Millennials finally break through and enter the real estate market to buy their first home. It is predicted that the persistently high rents will push many of these young potential buyers into homeownership as it continues to make less financial sense to continue renting if they can put together a down payment.”

Some renters, especially the younger ones, spend so much of their monthly incomes on rent that putting away any savings at all for a down payment is a struggle. So the ultimate impact may remain to be seen. But increasingly it’s beginning to look like a seller’s market and no longer a buyer’s market. And that makes a difference if you’re doing wholesale.