The rent may be too damn high, but it’s not enough to turn most renters into buyers.
The gap between rental costs and household income is widening to “unsustainable levels” in many parts of the country, new research published Monday by the National Association of Realtors found, “and the situation could worsen unless new home construction meaningfully rises.” In the last five years, a typical rent rose 15% while the income of renters grew by only 11%, the study found. The top markets where renters have seen the highest increase in rents since 2009 are New York (51%), Seattle, (32%), San Jose, Calif., (26%), Denver, (24%) and St. Louis. (22%).
“Many of the metro areas that have experienced the highest rent increases are popular to millennials because of their employment opportunities,” Lawrence Yun, NAR’s chief economist said in a statement. “With a stronger economy and labor market, it’s critical to increase housing starts for entry-level buyers or else many will face affordability issues if their incomes aren’t compensating for the gains in home prices.”
But most renters are reluctant to buy. Only 12% of current renters say they plan to buy a home within the next year, according to the latest “Housing Confidence Index” published last week by real-estate company Zillow, although this was up 25% on the previous year. On a scale of 1 to 100, with a reading of more than 50 indicating general confidence, the housing confidence index rose to 70.6 in January 2015, up 4.4 points over the previous year.