{"id":1004113361,"date":"2015-02-13T07:50:48","date_gmt":"2015-02-13T15:50:48","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004113361"},"modified":"2022-12-03T05:34:33","modified_gmt":"2022-12-03T13:34:33","slug":"february-issue-rising-rents-falling-payments-cause-for-worry","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/february-issue-rising-rents-falling-payments-cause-for-worry\/","title":{"rendered":"FEBRUARY ISSUE: Rising Rents, Falling Payments\u2014Cause for Worry?"},"content":{"rendered":"

By Anna Spiewak, Senior News Editor\"MILLENNIALS_000020456792XLarge\"<\/a><\/em><\/p>\n

If you rent an apartment, you might have noticed that you\u2019re shelling out more in monthly payments than your home-owning neighbor, friend or coworker.<\/p>\n

That\u2019s because, according to Zillow, buying a home is now more affordable than renting in urban clusters. The company\u2019s third-quarter 2014 Affordability Index estimates that median-income buyers can expect to spend about 15 percent of their income on a mortgage payment today, compared to renters shelling out about 30 percent.<\/p>\n

\u201cEven for those first-time or lower-income Millennial buyers age 23 to 34 that are likely to earn less money and put less down on a home, buying a home remains more affordable today than it was in the pre-bubble period from 1985 to 1999,\u201d the report states.<\/p>\n

While interest rates remain low and home value appreciation continues to moderate, buying a home will continue to be more affordable than it has been in the past. Apartment dwellers, meanwhile, continue to struggle. Rents \u201care historically unaffordable in the largest 35 metro areas,\u201d including Miami, San Francisco, New York, San Jose and Los Angeles.<\/p>\n

Although these numbers are of mild concern to multi-family landlords and developers, they are by no means cause for panic, according to real estate analysts.<\/p>\n

\u201cIt\u2019s a longer-term issue that multi-family developers and owners will have to face, but I don\u2019t think that measure of monthly payment versus mortgage payment is a sole alarm bell,\u201d David Crowe, chief economist for the National Association of Home Builders, told CPE<\/em>.<\/p>\n

Thriving Rental Market<\/strong><\/p>\n

The apartment market is on track to keep thriving in coming years, and here\u2019s why:<\/p>\n

\u25a0 Financing is still an issue for younger consumers, especially since a big chunk of their income goes toward rent, making it difficult to save up for a house.<\/p>\n

\u201cMillennials have not necessarily started their careers at the level of pay they expected or that their predecessors had,\u201d Crowe said. As a result, many younger people are unable to accumulate the cash required to cover a down payment and closing costs, said Crowe.<\/p>\n

Underwriting standards are still unusually tight to obtain, making it difficult for Millennials facing college loan payoffs or other expenses to qualify for a mortgage.<\/p>\n

\u201cYou can only spend a certain amount of your income on debt service,\u201d said Richard Green, director of the University of Southern California\u2019s Lusk Center for Real Estate. \u201cSo even if you\u2019re spending only 15 percent of your income on your house, if you\u2019re spending another 10 percent on student loans and 5 percent on your car, the lender might not like you.\u201d<\/p>\n

\u25a0 Demographics matter: Married couples are much more likely to buy a home than singles.<\/p>\n

\u201cThe ownership rate among married couples is 80 percent; among singles, it\u2019s 50 percent,\u201d Green said. Even that 50 percent figure is inflated, since it counts homeowners who have been widowed as \u201csingle,\u201d he added.<\/p>\n

Furthermore, fewer people are getting married these days than in previous generations, and that adds a strong factor in the landlord\u2019s favor, according to Green.<\/p>\n

On average, apartment rents are expected to rise 4.5 percent for Class A and B+ assets and 5.1 percent for Class\u00a0B and C assets, according to Pierce-Eislen\u2019s recently released 2015 multi-family rent forecast and outlook report. That projected growth is lower than last year\u2019s average 5.9 percent increase for all multi-family categories, but is still positive compared to previous years, the report states.<\/p>\n

Tough Spot<\/strong><\/p>\n

Nevertheless, analysts agree that price escalation is of some concern for landlords. In many major markets, apartment residents feel caught between a rock and a hard place, unable to afford the rent for most typical apartments or make the down payment on a house.<\/p>\n

Moreover, wages are either increasing too slowly to keep up with the cost of rental housing or declining in real terms. \u201cThis creates a problem for renters, even if they want to become homeowners: Saving for a down payment is becoming a harder and harder thing to do,\u201d Green added.
\nJack Kern, director of research at Pierce-Eislen, agreed. \u201cThere is widening income inequality and sluggish wage growth for low- and moderate-income workers,\u201d he said.<\/p>\n

To help alleviate some of this renter\/potential homebuyer dilemma, analysts have offered several suggestions:<\/p>\n

\u25a0 The federal government could help relax some restrictions on homeownership.<\/p>\n

\u25a0 Congress could enact housing finance reform, clarifying the government-sponsored enterprises\u2019 future and revising Dodd-Frank.<\/p>\n

\u25a0 If construction in more expensive markets became easier, developers would increase inventory. This adjustment in supply and demand would help mitigate price increases.<\/p>\n

\u201cOur preference survey suggests that people still want to own and it\u2019s present financial situations that are keeping them from achieving that goal,\u201d Crowe concluded. \u201cThe oldest Millennials who\u2019ve saved money and are secure in their employment, they\u2019re going to move forward, but it\u2019s a combination of relative rents to relative ownership, as well as the increasing financial ability to make that leap.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Are renters now paying more than homeowners?<\/p>\n","protected":false},"author":952,"featured_media":1004113368,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21742],"tags":[],"class_list":["post-1004113361","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest"],"acf":[],"yoast_head":"\nFEBRUARY ISSUE: Rising Rents, Falling Payments\u2014Cause for Worry? - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/february-issue-rising-rents-falling-payments-cause-for-worry\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"FEBRUARY ISSUE: Rising Rents, Falling Payments\u2014Cause for Worry?\" \/>\n<meta property=\"og:description\" content=\"Are renters now paying more than homeowners?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/february-issue-rising-rents-falling-payments-cause-for-worry\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2015-02-13T15:50:48+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-03T13:34:33+00:00\" \/>\n<meta name=\"author\" content=\"Anna Spiewak\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/02\/MILLENNIALS_000020456792XLarge.jpg\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/february-issue-rising-rents-falling-payments-cause-for-worry\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/february-issue-rising-rents-falling-payments-cause-for-worry\\\/\"},\"author\":{\"name\":\"Anna Spiewak\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/#\\\/schema\\\/person\\\/1bbb99675c2609ea2e6792f8b25d7b76\"},\"headline\":\"FEBRUARY ISSUE: Rising Rents, Falling Payments\u2014Cause for Worry?\",\"datePublished\":\"2015-02-13T15:50:48+00:00\",\"dateModified\":\"2022-12-03T13:34:33+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/february-issue-rising-rents-falling-payments-cause-for-worry\\\/\"},\"wordCount\":819,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/february-issue-rising-rents-falling-payments-cause-for-worry\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/wp-content\\\/uploads\\\/sites\\\/46\\\/2015\\\/02\\\/MILLENNIALS_000020456792XLarge.jpg\",\"articleSection\":[\"News\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/february-issue-rising-rents-falling-payments-cause-for-worry\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/february-issue-rising-rents-falling-payments-cause-for-worry\\\/\",\"url\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/february-issue-rising-rents-falling-payments-cause-for-worry\\\/\",\"name\":\"FEBRUARY ISSUE: Rising Rents, Falling Payments\u2014Cause for Worry? 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