Soaring rent prices used to be a big city problem.
But now, with 1 million more renter households today than there were at the end of the second quarter of 2020, rents are an everywhere problem.
It’s not far-fetched to say that there is a housing crisis in the U.S. and affordable housing is a thing of the past.
Due to sky-high housing costs and mortgage rates, many Americans are forced into a competitive rental market.
This is making it hard for people to afford to live.
The Issue with Rental Prices
These higher rents put people at the lower end of the income spectrum at risk of homelessness.
And, the last of the pandemic rental assistance relief is running out in many states.
This has forced many renters to move, take on more debt to pay rent, or face eviction if they can’t pay.
Average rents were up 14% in December 2021 relative to December 2020.
A study by RedFin found that the median monthly rent in the U.S. went up 17% from March 2021 to March 2022, to $1,940.
Several metro areas have seen rent increases of more than 30%. In many of these metro areas, over 20% of the renters are behind on their payments.
Census data released earlier this month shows that rents were 23% higher in the second quarter of 2019 than in the same quarter of 2018.
These are the rents for new tenants, not renewal rents.
But those are going up as well, just not as much.
Landlords haven’t hesitated to capitalize on the strong demand for housing, especially in the places where folks migrated because of remote work.
Rental Rates Increases
But this isn’t a brand new problem.
It’s been building for a while.
The rent-to-income ratio nearly doubled in 35 years ending in 2020, according to a new study.
This means Americans spend significantly more of their earnings on rent than 40 years ago.
National median rent prices rose 149% during the studied period, while overall income grew just 35%.
It’s simple to see that there is a serious issue with that.
Over 5.5 million renters are worried about their ability to pay next month’s rent.
Rental Prices and Inflation
On a broader level, soaring rental prices contribute to inflation.
Inflation has caused the Fed to raise rates and put the brakes on the economy.
But even if inflation were to subside in every other aspect of the consumer price index, rising rents alone could keep inflation levels elevated through the year, said Frank Nothaft, chief economist at real estate data firm CoreLogic.
Rent prices are a bit recession-proof because people are less likely to buy homes when the economy isn’t doing well, keeping the demand for rental housing high.
Experts say that the lack of affordable rentals will likely worsen in the coming months since mortgage interest rates are rising to highs that haven’t been seen since 2011.
This is forcing people who want to buy a home to rent instead.
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