According to statistics from CoreLogic, some 4.6 million homes have entered into foreclosure since the housing crisis began five years ago. Most of these former homeowners have gone on to become renters.
Even though the housing market is now on its way to recovery, tightening credit conditions have meant even more potential homeowners have been pushed out of the market and into rental property that includes single-family homes as well as apartments. It’s estimated that 35% of US households are now in rented accommodation. This equates to 43 million households, the highest rate in more than 10 years. Figures from Harvard’s Joint Center for Housing Studies show that the number of renters has increased by 4 million since 2007. The center began keeping records back in the 1970s, and rental rates for those aged between 25 and 54 have now reached their highest since these records began.
All this has meant the number of rental vacancies has decreased while the cost of renting has increased substantially. According to the article in CNBC.com, half of those renting in the US have to pay more than 30% of their income on housing. Ten years earlier this figure was just 18%. People on lower incomes are even more badly affected. Even though many younger Americans enjoy living in cities and the mobility provided through renting, most still aspire to home ownership. A recent survey showed that nineteen out of twenty people under the age of 30 would still like to buy home at some point in the future. It remains to be seen how easy this will be as property prices are rising faster than anticipated, and this is at least partially due to investor demand. Even though more rental stock is on its way, demand is not likely to ease in the near future, and even though many renters would like to buy, increasing mortgage rates and property prices are making it far more difficult.
In addition some people have high student debt, and a lot of people haven’t seen their income increase substantially over the past few years, especially for those in low and moderate income brackets. Their wages haven’t been keeping pace with inflation, and people in this situation are likely to find it very difficult to buy homes in the near future. This is especially true for renters living in expensive areas, where rents are regularly increased to the maximum amount the county allows. This makes it very difficult to save up for a down payment.