The National Association of Realtors (NAR) released their findings of a study in which they studied “income growth, housing costs and changes in the share of renter and owner-occupied households over the past five years in metropolitan statistical areas throughout the US.”
Don’t Become Trapped
The study revealed that over the last five years a typical rent rose 15 percent while the income of renters grew by only 11 percent. If you are currently renting, this disparity in growth could get you caught up in a cycle where increasing rents continue to make it impossible for you to save for a necessary down payment.
The average renter in the United States pays 30 percent of their income on housing compared to that of a homeowner who can expect to spend 15 percent.
In many metro areas the percentage of income spent on housing is even higher and continues to rise every year. Like in San Francisco, CA, where the average renter spends 59 percent of their monthly income on housing or nearly 65 percent in Boston, MA.
Homebuyers who purchased their home over the same five-year period locked in their housing costs and were able to grow their net worth as home values have increased and their mortgage balances have gone down.
Know Your Options
Perhaps, you have already saved enough to buy your first home. HousingWire reported that analysts at Nomura believe:
“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment.
It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)
As we have reported last week, over 60 percent of Millennials who recently bought a home put down less than 20 percent; 36 percent put down less than 5 percent. Your dream home may be more attainable than you ever imagined!
Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Have a professional help you determine if you are eligible to get a mortgage.