70% of Households Finding It Harder to Pay the Rent

​Nearly 70% of renter households have a gross family income that is less than the US median and soon (if not already) that is catching up to them in their ability to pay rent.

For the first time in decades, the rent-to-income ratio has reached 40%, marking one of the least-affordable rental markets ever, according to a new report from CoreLogic’s Economist and Principal, Yanling Mayer.

Many say when the ratio exceeds one-third, affordability is getting to be a stretch.

The estimated rent-to-income ratio for the rest of 2023 should continue to hover around 40%, with low-to-moderate-income renters bearing the brunt of high inflation.

Likewise, these renters are also being priced out of homeownership, as home prices have moved in tandem with rents, the report showed.

From August 2021 to September 2022, the single-family rental market recorded double-digit, year-over-year growth that reached nearly 15% at its peak.

“But unlike millions of homeowners who have had the opportunity to refinance into low-rate mortgages or cash in on their all-time-high housing wealth, there has been no such relief for US tenants, as low interest rates and the resulting inflation have only fueled fast rental cost hikes,” CoreLogic’s Economist and Principal, Yanling Mayer, writes.

Here is more sticker shock, with numbers posted even after the Fed slowed its interest rate hikes: As of August, the median asking rent for U.S. single-family detached or attached housing units was $2,600, up by 4% year over year. August’s median asking rent for condominiums was $2,800, up by 3.7% on an annual basis. The median asking rent for small, two-to-four-unit residential apartments was $2,300, up by 4.5% year over year.

Stagnant wage growth hasn’t helped either, Mayer said.

On top of that, Bloomberg reported last week that Moody’s Mark Zandi said it costs $734 more per month to buy the same goods and services as two years ago for US households who earn the median income.

Some solace was offered recently by MRI Software, which said the apartment market is expected to cool now that summer’s activity is past.

MRI suggests this would be similar to what happened in 2019 before the pandemic emerged.

Fall is generally a slower time for the country’s multifamily market and based on some key indicators on a year-to-date basis, it finds much in common with pre-pandemic trends, according to its report.

Meanwhile, National Multifamily Housing Council reported this week that it has never been more expensive to buy a home.

“A combination of rapid house price appreciation and rising interest rates caused the monthly cost of homeownership to rise 78.0% over the past three years.”

That’s an average of 21.2% per year—a pace considerably faster than that of rent growth, NMHC said.

In fact, by the second quarter of this year, the monthly cost of homeownership for a newly purchased house became $1,298 more than the monthly cost of renting a professionally managed apartment, marking the highest buy-to-rent premium on the record, it added.