Realities of Today's Rental Market
Whether you've been doubled-up and are now looking to strike out on your own or you're thinking about finally moving out of your parents' house, here are a few things you need to know about today's home rental market.
The competition is fierce: Demand for rental properties has been on the rise since the housing market collapsed in 2007, when millions of Americans lost their homes to foreclosure and moved into rental units. At the same time, construction was stalled because builders couldn't get loans. Between 2007 and 2013, the U.S. added more than 6 million tenants, compared with only about 200,000 homeowners,%VIRTUAL-pullquote-Conditions for buyers and renters can vary dramatically even within cities themselves, so it's important to know your local market....% according to Stan Humphries, Zillow's chief economist. And now? An improving economy has many Americans finding jobs and thus looking for rental units, which means you can expect additional competition.
It's ridiculously expensive: You know the magic formula, right? That your housing costs -- rent and utilities -- shouldn't exceed 30 percent of your income? Technically, if it's more than that, then it's not affordable! Well, a recent analysis conducted by Zillow for The New York Times found 90 cities where the median rent -- not including utilities -- was more than 30 percent of the median gross income.
There's no relief in sight: Builders are trying to keep up with demand, but in the big cities, in particular, this takes time. There are approvals, permits and more. Plus, building new units is a pricey proposition. That said, demand is expected to outpace supply for the foreseeable future. This means you can expect rents to continue to rise, particular in popular cities that offer culture, convenience and more -- cities like New York, Miami, San Francisco and others.
Buying is (still) cheaper: A recent Zillow analysis shows that in a majority of the country, buying a home is still financially better than renting after only two years. But conditions for buyers and renters can vary dramatically even within cities themselves, so it's important to know your local market and do what works best for your situation. For those renters who can't qualify for a mortgage or aren't able to save enough for a down payment on a house, renting can be a more flexible, and often far less frustrating option. See a list of the top cities where it's better to rent than buy here.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow or AOL.