Staggering Rent Increases in 2017: Will 2018 Follow?

2017 was a painful year for renters. Americans spent a record amount of their household income on rent.

If sending in your rent check is painful, you’re not alone: American renters — especially those in major cities like New York, Los Angeles and Chicago — spent a staggering amount on housing in 2017.

Collectively, American renters paid a total of $485.6 billion in 2017, up $4.9 billion from the $480.7 billion in 2016. That’s according to an analysis by Zillow, a real estate and rental website. Renters in Las Vegas, Minneapolis and Charlotte felt that increase the most. In each of those cities, rent rose more than 7% since 2016.

The average rent for a one-bedroom apartment ranges from $830 per month in places like Houston and San Antonio to more than $2,000 per month in New York, San Diego and San Jose, according to an analysis of Apartmentlist.com.

The median U.S. rental now requires 29% of median monthly income, according to Zillow. Between 1985 and 2000, renters spent about 25.8% of their income on housing. Financial experts say people should not pay more than 30% of their salary on housing, but that’s no longer feasible for many Americans.

The cost gap between renting and buying is widening as rents stabilize and home prices rise, a separate study released this month by Realtor.com found. In 57 of the top 59 largest metros in the U.S., it makes more sense to buy based on simple monthly costs relative to income.

Make Sense to Buy?

It only makes sense to buy if all of these conditions are true

  1. You want a house
  2. You can afford a house
  3. You have a stable job
  4. You are willing to give up the mobility freedom of renters
  5. You have time for upkeep and maintenance

The Fed re-blew the property bubble. Point number 2 is a problem for most. Millennials may find point number 4 a problem.

Squeeze is On

The median U.S. rental now requires 29% of median monthly income. Is owning a home any better? At least with owning a home, you have locked in your monthly payment, but not property taxes. The latter is obscene in Illinois where a $500,000 home may have property taxes of $15.000 a year.

There is no reason to believe rent prices will fall in 2018.

Mike "Mish" Shedlock

Comments
No. 1-25
Taunton
Taunton

@mishmash exactly. When jobs aren't stable, the housing situation won't be stable. Stable, breadwinning jobs have all but disappeared and the only jobs to prosper in this "recovery" are either tech jobs, which are NOWHERE near as prevalent as people imply they are, and service jobs. Neither of those are particularly stable as jobs, and with most people in the service sector with no benefits and no job seurity it's hard to imagine stability. Therefore, freedom is a necessity, not a preference

MishMash
MishMash

There's mobility and then there's mobility due to instability.

Advancingtime
Advancingtime

Sorry but the "no edit" format can be difficult. Here is the proper link

Advancingtime
Advancingtime

We can blame government policies for much of the rent increases. We create trouble by trying to deny that many people go through life making their own problems and allows the government to sidestep the issue by pawning the problem off on the private sector. An eviction on someone's record usually means they become ineligible for government housing programs. By making them "ineligible" for certain programs the government shrewdly and cleverly sidesteps having to deal with these people.

The brutal truth is that government housing cherry-picks the best of the low-income renters providing them with very low rents and nice apartments while dumping the rest on the private sector. This drives up rental prices on everyone else. More on this subject and other issues concerning housing in the article below.

http://Government Housing Policy Heaps Misery On Private Landlords.html

Stories