Bye bye hard-earned cash: rent prices climbing to 30% of income

Bye bye hard-earned cash: rent prices climbing to 30% of income

Rent prices continue to outpace gains in income, as financial strain worsens.

According to a new analysis, rent affordability is becoming a paradox, to an excess of 30% of income required on rent. Zillow, an online real-estate database and popular resource for home buying inquiries, released its latest update on renting v. buying, and the share of income needed to rent a home and is unconscionable.

Pre-bubble figures indicate that the average income needed to afford rent in the U.S. was nearly 24.4 percent (from 1985 through the end of 1999). However, home owners only shell out 15% of their income for a mortgage payment, Zillow affirms. And, the proportion of income needed to buy a home is at one of the most favorable points its ever been.

Rent prices have continued to spike year after year in 28 of the 35 largest metro areas covered by Zillow. Yet median home values and rents nationwide are both ratcheting upward up 3.3 percent and 4.3 percent, respectively, as of the second quarter’s closing.

And purchasing a home has become even more affordable over the last year while renting has become even more unacceptable. According to Q2, renters pulling in the U.S. median income seeking to rent a median-priced rental unit should expect to hand over 30.2 percent of their income each month to their landlord, ticking up from 29.5 percent at the midpoint of last year.

Yet home buyers are only expected to pay 15.1 percent of their income to a mortgage payment of the standard U.S. home, marginally down from 15.2 percent in Q2 of 2014.

Source: eCreditDaily 



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