Even though the American Dream is still alive and kicking, growing numbers of people are renting their home. This is impacting realtors as well as home builders who have seen the numbers of buyers decline due to a combination of factors.
These include the foreclosure crisis, and some people are choosing to rent rather than buy as it gives them more flexibility to move for jobs. However the growing number of renters is good news for landlords. According to an article in RealtyTrac, rents are still rising in New York City, Los Angeles and San Francisco. In Manhattan prices have increased for five consecutive months, and in July reach the highest level for six years. If you want to rent in Manhattan then the average price is $4,022 a month. A studio can cost $2,573 a month, while a one-bedroom property will go for around $3,349. A two bedroom home in Manhattan will rent for $4,817. If you want more space and an extra bedroom then you need to be prepared to pay $8554 each month to rent a three bedroom home.
As rental rates increase in the coastal cities, home ownership rates are falling. In the past homeowners typically outnumbered renters by around 3 to 1, but figures for home ownership have decreased from a peak of 69.2% in the fourth quarter of 2004, to 65.2% in the fourth quarter of last year. Some experts feel that these figures may never fully recover, and others anticipate home ownership rates could drop to 60%.
On the other side of the coin, 35.4% of US households rent their property, up from 31% in 2004. This equates to 43 million renter households, an increase of 4 million compared to 2007. Unfortunately for renters, rental rates have risen by 6% over the past 10 years. At the same time income in rental households has dropped by 13%. More than half of renters pay more than 30% of their income in rent, an increase of 12% compared to a decade earlier. This means increasing numbers are cash-strapped and find it difficult to keep a roof over their heads.
The substantial rise in the number of renter households has led to an increase in demand for new rental housing, but builders are not keeping up with demand, especially where multifamily units are concerned. The rise in demand for rental property has also led to a substantial fall in rental vacancies.