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
- You want a house
- You can afford a house
- You have a stable job
- You are willing to give up the mobility freedom of renters
- 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