Renting hasn’t offered much of a respite from elevated home prices and soaring mortgage rates during the pandemic.
Renting hasn’t represented much of an escape from high home prices and soaring mortgage rates during the pandemic. Rents have soared right along with homeownership costs.
But a bit of good news has emerged on the renting side.
The median asking rent for zero- to two-bedroom properties dipped 0.6%, or $10, to $1,771 in August from July, according to Realtor.com. That’s the first decline for the top 50 cities since November.
It’s “perhaps a sign that more typical seasonal cooling is returning to the rental market, like we’ve seen in recent for-sale data,” wrote Realtor.com economists Jiayi Xu and Danielle Hale.
But this also could indicate rents have peaked, as the Federal Reserve’s interest-rate hikes begin to put a dent in the economy.
To be sure, rents still rose 9.8% in the 12 months through August. But that was the first time the increase was in single digits since July 2021.
In any case, “real affordability challenges persist, as inflation continues to outpace annual wage growth, evaporating real gains employees might see from an otherwise strong labor market,” the Realtor.com economists said.
Consumer prices jumped 8.3% in the 12 months through August, while average hourly wages gained 5.2%.
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Five Most, Least Affordable
A rule of thumb says that rent is affordable when it totals 30% or less of household income. These are the five least affordable housing markets as of August, according to Realtor.com.
1. Miami/Fort Lauderdale/West Palm Beach, rent as a share of household income: 46.5%
2. Los Angeles/Long Beach/Anaheim, rent as a share of household income: 40.7%
3. San Diego/Carlsbad, rent as a share of household income: 37.1%
4. New York/Newark/Jersey City, rent as a share of household income: 36.3%
5. Boston/Cambridge/Newton, rent as a share of household income: 35.1%.
These are the five most affordable markets:
1. Oklahoma City, rent as a share of household income: 17.5%
2. Minneapolis/St. Paul/Bloomington, rent as a share of household income: 20.1%
3. St. Louis, rent as a share of household income: 20.3%
4. Kansas City, Mo., rent as a share of household income: 20.6%
5. Louisville/Jefferson County, rent as a share of household income: 20.6%.
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Expensive Homeownership
Affordability is a big issue on the home-buying front as well.
The 30-year fixed-rate mortgage averaged 6.29% in the week ended Sept. 22, according to Freddie Mac, an almost-14-year high. The rate rose from 6.02% a week ago and was up from 2.88% a year ago.
And that increase is hitting home buyers right in the pocket book. Those with a $3,000 monthly budget can afford a $479,750 home at 6% mortgage rates, down from a $621,000 home a year ago, when 3% mortgage rates prevailed, according to real estate brokerage Redfin.
“Put another way, this homebuyer has lost $140,000 in spending power this year as mortgage rates have doubled,” Redfin said.
