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 (33)
No. 1-25
Greggg
Greggg

Illinois (#2) is in a race to the bottom with New Jersey (#1). I have a feeling that Mish is thinking of Frank Zappa "Going to Montana Soon'. #33. Montana
Effective Tax Rate: 0.80% , Average Home Value: $242,342, Average Property Tax: $1,950.

Sechel
Sechel

i bought my current home 15 years ago and while the rent vs buy math worked out i found that a common assumption mortgage interest deductability

Sechel
Sechel

frequently doesn't hold true

Stuki
Stuki

This is how indentured servitude is supposed to work. Nothing weird nor anomalous about it.

If those who already owned cell phones in an area, along with those whose income derived from taking a cut from selling existing phones, could ban anyone else from making new ones; cell phone prices, and the pace of cell phone technology improvement, would closely follow that displayed by housing as well. Just like pricing, availability and quality of most goods in the Soviet Union did. That’s just how complete lack of any freedoms whatsoever always work.

Freedom is what improves accessibility and quality of goods over time. As it allows those capable of producing something more efficiently, to drive incompetents and leeches out of business, by offering potential customers a better deal. Rinse and repeat, and you get better cell phones cheaper. Don’t rinse, don’t repeat, and you get decaying roach motels for ever higher prices. With incompetent Politburo apparatchiks and slum lords cheering the whole way.

When there is no freedom, as is the case in US housing, it’s hardly surprising that availability and quality of the stuff closely follows the same trajectory it did for the last wave of slaves; those picking cotton in Antebellum. Whose shacks required a sizable chunk of their income to afford as well.

ReadyKilowatt
ReadyKilowatt

Gee, if only there were some solution...
Denver's housing boom/bubble is causing a lot of building to happen. Even the old long-abandoned Gates Rubber factory is being converted to apartments or condos. I suppose they're all going to be "luxury high end" units, but at least there's more inventory hitting the market. Seems to me real estate is the same as oil: the fix for high prices is high prices. The difference is that government puts insane demands on the former, creating scarcity. Not sure if it is intentional or stupidity.