Breaking the Cycle of Long-term Renting
A decade after the 2007 housing market crash, some metros are still struggling to recover to pre-crisis housing activity. 2016 marks the highest rental rate since 1965. Home price appreciation is causing many renters to delay homeownership. In most metros, only about 45% of renters could afford a median-priced home, and this ratio drops in expensive markets like the West Coast, Northeast, and Florida.
Some demographic groups are more likely to rent than others. According to the Pew Research Center, young adults, nonwhites, and lesser educated groups are historically more likely to rent than others. However, research noted that, “rental rates have also increased among some groups that have traditionally been less likely to rent, including whites and middle-aged adults.”
In 2006, the peak of the period known as the “housing bubble,” approximately 31% of households were renting. This figure has increased significantly, as of 2016 approximately 37% of households are currently renting. Young adults, under 35, continue to make up the largest segment of renters. As of 2016, 65% of under 35 households were renting, up from 57% in 2006. Due to student debt, rising home prices, and older generations occupying their homes longer, this age group that typically makes up the first-time home buyer bracket, is getting priced out of homeownership.
A home is one of the first appreciating assets many people own and the first way to start building wealth. Breaking the cycle of long-term renting strengthens the community of homeowners and helps individuals establish financial independence.