Rising Rents May Spur First-Time Home Buyers

Zillow reports that annual rent hikes across the United States in April outpaced the rise in home prices for the first time in at least five years — a shift that is likely to stimulate the languid home-buying market. Median rent rose 4 percent last month from a year earlier to $1,364, while home sale prices climbed 3 percent to $178,400. The numbers represent the first time since Zillow started tracking the data in 2010 that rents rose faster than home prices. Svenga Gudell, Zillow’s head of economic research, observes, “For those renters that can scrape together even a modest down payment, qualify for a loan and find an affordable home to buy, home ownership will look increasingly attractive.” Multifamily construction nose-dived after the housing crash and financial crisis of the late 2000s, pushing up median rents by 15 percent since 2010. While building activity in this sector has picked up the last two years, it is not yet on par with rising demand. With job growth reaching a 15-year high of 3.1 million last year, many Millennials are finally moving into their own apartments. In the first quarter, the number of occupied housing units nationwide soared by 1.5 million over the previous 12 months, notes the Census Bureau. New renters accounted for all the gains, and the rental vacancy rate dipped to a 22-year low of 7.1 percent as of March 31. Some analysts warn that rising rents will limit the ability of many apartment residents to save for a down payment, especially with wages growing more slowly than rents. That, in turn, will slow the shift to homeownership. | Read More