The latest rental market report by RealtyTrac®, the nation’s leading source for comprehensive housing data, show that buying is still the more affordable housing option — unless you’re a typical millennial.
The report is an analysis of fair market rents and median home prices in more than 500 U.S. counties. RealtyTrac® analyzed 2015 fair market rental data recently released by the U.S. Department for Housing and Urban Development for three-bedroom properties in 543 counties nationwide with a population of at least 100,000.
In the 473 counties with sufficient rental and home price data, the fair market rent for a three-bedroom property in 2015 will require an average of 27 percent of median household income, while buying a median-priced home requires an average of 25 percent of median household income based on the median sales price in November.
Buying a median-priced home was more affordable than renting a three-bedroom property in 68 percent of the counties analyzed, representing 57 percent of the total population in those counties.
But in the 25 counties with the biggest increase in millennials between 2007 and 2013, fair market rents for a three-bedroom property in 2015 will require 30 percent of the median household income on average while buying a median-priced home requires 36 percent of median household income on average. For the analysis, millennials were defined as anyone born between 1977 and 1992.
RealtyTrac® attributes the differential to the job market. The more affordable rental markets lack the employment and wages millennials are seeking. At the same time, a good job market is driving up home prices. Daren Blomquist, vice president at RealtyTrac® sees this as an opportunity for landlords. “Those emerging markets with the combination of good jobs, good affordability and a growing population of new renters and potential first-time homebuyers represent the best opportunities for buy-and-hold real estate investors to buy low and benefit from rising rents in the years to come.”
Those markets with the biggest increase in millennials over the past seven years include much of Washington, D.C., San Francisco and Denver, all of which saw an increase of more than 50 percent in millennial residents.
Other top markets with the biggest increase in millennials included area of New York, Nashville, Portland, St. Louis, Seattle, Charlotte, Minneapolis, Indianapolis, Atlanta, Orlando, Austin, Des Moines and Midland, Texas.
The average 2015 fair market rent in these top 25 markets is $1,459, 19 percent above the national average. Denver and Midland County, Texas, saw fair market rents increase more than 20 percent.
The average unemployment rate among these counties was 5.2 percent in October compared to an average of 5.5 percent for all counties analyzed.
Markets With Highest Rent Increases
The top counties in terms of increasing fair market rents on three-bedroom properties were in Williamsport, Pa., Elizabethtown, Ky., and Midland, Texas, which saw an increase of 24 percent or more in fair market rents compared to 2014.
Other markets among the top 25 for increasing rents included counties in Denver, Colo., Asheville, N.C., Chicago and Santa Barbara, Calif. The average 2015 fair market rent in these top 25 counties is $1,327, 8 percent above the national average for all counties analyzed.
Among these counties, 2015 fair market rent on a three-bedroom property will require 25 percent of median household income on average while buying a median-priced home requires 27 percent of median household income on average.
Markets With Declining Rent
Sumter, S.C., Las Cruces, N.M., and Longview, Texas experienced the biggest decreases in fair market rents on three-bedroom properties. All three saw fair market rents decrease at least 13 percent from 2014 to 2015. Other decreasing markets included counties in several college towns: Bloomington, IL, Champaign-Urbana, IL, College Station, Texas, Terre Haute, Ind., along with Las Vegas.
“Inventory of single-family rentals are at an all-time high in Washoe County, keeping rental rates flat in 2014,” said Craig King, COO of Chase International, covering the Lake Tahoe and Reno, Nev., markets.
While 2015 bodes well for an improving purchase market, said Chris Pollinger, senior vice president of sales at First Team Real Estate which covers the Southern California market, says that renting is substantially more affordable in coastal markets and buying is only an affordable option in some inland markets. “We are still five to seven years from seeing the millennials enter into the housing market in the more affluent coastal areas.”
The average 2015 fair market rents in Tampa, St. Louis, New Orleans, Richmond, Va., Atlanta, San Diego, Sacramento and Orlando is $1,686, 38 percent above the national average for all counties analyzed. Renters in these counties will have to ante up 42 percent of median household income on average.
The RealtyTrac U.S. Foreclosure Market Report is the result of a proprietary evaluation of information compiled by RealtyTrac®. For more information, visit RealtyTrac.com
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.
