Growing rental costs a problem for homebuyers
In recent years, there has been a substantial increase in the number of individual and family renters. There has also been a steady rise in rents.
Those rental costs have been rising more rapidly than household incomes, thus making it difficult or impossible for many renters to save money for a down payment when purchasing a home.
The gap between rental costs and household income is widening to unsustainable levels across the country. As more renters face steeper costs, it may put them even further away from homeownership, according to a new study released by the National Association of Realtors.
NAR evaluated income growth, housing costs and changes in share of renter- and owner-occupied households over the past five years in metropolitan statistical areas across the U.S.
Over the past five years, a typical rent rose by 15 percent, while the income of renters grew by only 11 percent, according to their research.
"The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay," says Lawrence Yun, NAR's chief economist.
"Current renters seeking relief and looking to buy are facing the same dilemma: Home prices are rising much faster than their incomes," says Yun. "With rents taking up a larger chunk of household incomes, it's difficult for first-time buyers - especially in high-cost areas - to save for an adequate down payment."
Q. Are mortgage rates finally rising?
A. Not at this point. Freddie Mac, on April 1, released the results of its Primary Mortgage Market Survey, showing average fixed mortgage rates moving down again across the board.
Average fixed rates that continue to run below 4 percent will help keep affordability high for those in the market to buy a home as we head into the spring home-buying season.
Q. When will mortgage rates take a giant leap upward?
A. No one really knows if or when those rates will jump up. Although average interest declined in recent weeks, most of the warm glow from the Fed had faded by the end of the period, as the cold reality that the Fed will raise rates before long began to creep back into the market, according to a report from HSH Market Trends.
"That's not to suggest there's any kind of strong likelihood that rates will be shooting up before long, but absent truly terrible data about the domestic or global economy, interest rates seem unable to hold any interim bottoms they manage, and after each leg down, up we go," the report noted.
Q. When will mortgages be easier to obtain?
A. Credit is now easing, or soon will be. More lenders expect mortgage demand and profit margins to increase over the next three months, according to Fannie Mae's first quarter 2015 Mortgage Lender Sentiment Survey.
Lenders say the credit tightening is softening, according to the survey. Seventy-one percent of lenders surveyed about government-sponsored enterprise purchase loans say they expect purchase mortgage demand to rise over the next three months. That's a notable increase from last year, when 59 percent of lenders were optimistic about an increase.
Q. Are home prices and wages rising at about the same rate?
A. No, home prices are rising much more rapidly. An analysis of wage growth and home-price appreciation during the housing recovery of the past two years found home-price appreciation has outpaced wage growth in 76 percent of U.S. housing markets during that time period, it was reported by RealtyTrac.
The report also found home-price appreciation nationwide has outpaced wage growth by a 13:1 ratio.
For the report, RealtyTrac analyzed growth in average weekly wages from the Bureau of Labor Statistics and median home prices derived from sales deed data in 184 metropolitan statistical areas nationwide with a combined population of nearly 228 million, comparing 2014 to 2012 numbers.
• Email Jim Woodard at storyjim@aol.com.
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