Rising rents are forcing renters to outspend home owners on housing costs, according to a recent study. Since 2005, home owners’ housing expenses have climbed from 31.9 percent of their household budget to 33.2 percent. On the other hand, in that same time period, renters’ expenses have jumped from 35.6 percent to 38.4 percent, according to the October CoreLogic U.S. Housing Trends. In the last 26 years, home owners have increased the amount they spend on household expenses by 12 percent while renters have increased it by 22 percent, according to the study. Earlier this month, Capital Economics economists noted that for the first time in 30 years the median monthly home loan payment is about the same -- or less -- than the median rental payment. Yet, with the bleak job market, home ownership rates continue to fall in many parts of the country, particularly among younger generations. CoreLogic found in its report that the home ownership rate for the 25-to-34 age group dropped from 51.6 percent in 1980 to 42 percent in 2010. For the 35-to-44 age group, home ownership rates fell from 71.2 percent to 62.3 percent over that period. Source: RISMediaThis supports what I am seeing in the market as well. Property owners are not negotiating on the price of rentals in any way. Over the past year, the leased amount for a property is the same as the asking price for a property. The numbers in the article above article also suppport that claim and indicate that prices for rentals are actually rising.
New construction by and large is in the multi-family rental property, and not in condos. Developers always lag the market, and this market is no exception. I do not expect to see any new construction of condominiums for the next 18 months.
The result of this will be a slow rise in price for existing properties, increasing the property value of homeowners.