Nearly a decade after home prices peak and the housing bubble burst, rental prices are soaring across the country. Cities like Denver and Dallas are quickly approaching rental prices that were once reserved for cities like Los Angeles and San Francisco. Median rent for a 1 bedroom apartment in these cities ranges from $1300-$1500 per month. As the gap between rents and incomes continues to widen to an unsustainable level, many young Americans are getting squeezed. According to the National Association Of Realtors, rents have jumped 15%, while incomes have only increased by 11%.
Recently, a Denver millennial Eric Arther told a Bloomberg Business writer “I pay $1,410 in rent for my one-bedroom apartment in downtown Denver. If I pay that much, I’d like to build some equity.” With rental prices continuing to rise, many millennials are beginning the weigh the pros and cons of homeownership.
According to the National Association of Realtors, millennials make up to 32% of the U.S. housing market in 2014, up from 28% two years earlier. While many millennials must first overcome the hurdles of student loan debt, lack of down payment and family planning; industry professionals expect these percentages to continue to rise. Jed Kolko, chief economist for real estate website Trulia, stated in a telephone interview with Bloomberg Business “We are at the beginning of a multi-year period where more young people become homeowners”
While rents are expected to continue to soar while outpacing price gains by the end of the year, many experts expect the higher mortgage rates, tight credit, and down payment requirements may make it harder for millennials to qualify for homeownership.
However, as rental vacancy hits a 21 year low and rental prices soar, many millennials may take the leap to homeownership according to industry expert, Stan Humphries, chief economist for Zillow Group. Another element pushing millennials toward homeownership is the likelihood the Federal Reserve will increase interest rates, as the central bank confirmed last week that they’ll consider raising the benchmark rate as early as June 2015.
As more millennials are getting ready to purchase their first home, real estate professionals are facing a new challenge as demand for first-time buyers normalizes. The Denver market in particular is experience a major boom, as prices for both renters and buyers alike has increased 14.7% in the last year. According to RE/MAX Alliance agent Anthony Rael “There is less inventory in the traditional price range, where somebody is trying to buy their first home, which is under $300,000 and it’s tough. If we doubled our inventory in that range tomorrow, it would be gone tomorrow.”
For more information please visit https://davekevelighan.com/ or call today!
