This weeks Homebuyer Tip from Catherine Mitchell, The Intentional Realtor®™

Homebuyer Tips

From Catherine Mitchell, The Intentional Realtor®™,

Since 2010 average rent rose 15% - while renter income grew 11%

Have you noticed? There’s a growing trend in our society where the cost of rent is rising considerably faster than our income.  Simply put, our pockets just can’t keep-up with the rising cost of rents. Not to mention, there’s a widespread belief that you should only spend about 30% of your monthly income on housing.  However, nowadays people are spending up to 50% of their monthly income just to keep a roof over their heads.  It’s disturbing, yet true. 

Since 2010 average rent has risen 15%

Blame it on our economy, but for some purchasing a home has become much more difficult, so as a result more people are becoming long term renters.  What we are starting to see is a trend where rental households are now on the increase and homeownership is on the decline. When housing prices fell after the mortgage crisis, investors bought properties for cheap with the notion to rent them out, therefore flooding the market with an abundance of rental properties. Now because of this competition from these large investors, potential homebuyers are finding it much more difficult to purchase a home because inventory is tight.

Renter income has grown only 11%

Standing alone, an 11% increase in income is a strong number. For income to grow less than housing costs is not favorable.  We are seeing commercials on TV now with mortgage holders in stockades and renters dancing because they are free.  In reality, those happy renters have a net worth that is slipping steadily backwards. Since their rent is increasing more than their income, it is inevitable that they will rely more and more on credit to maintain their lifestyle.   Meanwhile, the mortgage holder enjoys a fixed expense for housing costs and presumably lives in an appreciating asset, both of which contribute positively to net worth. 

Cause and Effect

The gap between rental cost and household income could grow if rental housing remains in demand. In addition to the renters being free, the landlords are also free to raise rents as the market demands increase.  If the general population views renting as a long term housing solution, the reliance on credit is very likely to grow. If the population sees renting as a short term solution, with home buying as the long term plan, net worth will most likely increase.  I believe that net worth is the better choice!

Connect with Catherine:

As The Intentional Realtor®™, I will work hard to find the perfect home for you that is within your budget so your renting days can remain short term, which is why securing a good Realtor® is in your best interest to help you get the home of your dreams.  

For this and more real estate needs by The Intentional Realtor®™, connect with me, Catherine Mitchell, at (704) 898-0605 http://www.catherinemitchellrealty.com/

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