Millennials will spend 45% of income on rent before age 30

Millennials will spend 45% of income on rent before age 30

Most rent burdened generation

Reposted from Housingwire.com

As rent prices continue to rise, a new study shows Millennials are paying about 45% of their total income toward rent, and pay out close to $100,000 toward rent before they turn 30.

Analyzing U.S. Census Bureau data going back as far as 1974, a new study from RentCafé found that Millennials have been the hardest generation for those ages 22 to 30. And the future does not look bright for Generation Z.

As it turns out, Millennials pay about $92,600 in rent by the time they turn 30. While they may earn more in income compared to previous generations, they also have to spend more on rent, the study showed.

During that same age span, from 22 to 30, Gen Xers paid an average $82,200 and Baby Boomers paid about $71,000 on total earned income of $202,100 and $195,700, respectively.

While Baby Boomers paid just 36% of their income toward rent while in their 20s, Gen Xers paid 41% and Millennials now pay 45% of their monthly income toward rent.

If this trend continues, Generation Z is expected to have to pay around $102,000 in rent during their 20s

Some of this trend can be attributed to many Millennials preferring to live in downtown urban areas paying rent that they know is way too high, rather than buy a home.

Also, student debt is holding back many Millennials from buying a home, forcing them to pay higher rent prices. About 50% of Millennials who have student debt said they are uncomfortable taking on a mortgage. What’s more, this group was less likely to believe they could even qualify for a mortgage, according to data from the National Association of Realtors.

But a survey from Zillow shows that while mortgage payments are more affordable on average than monthly rent payments, renters are struggling to buy a home due to perceived down-payment barriers.

In 2017, rent increased 3.1% with higher increases seen in certain major metro areas, according to data from Trulia. Overall, rent has increased 19.6% since the end of 2012.

 


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NOT Owning Your Home in Hunterdon and Somerset County Can Cost You a Lot of Money!

NOT Owning Your Home in Hunterdon and Somerset County Can Cost You a Lot of Money!

Owning a home has great financial benefits, yet many continue to rent! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed.

Realtor.com recently reported that:

Buying remains the more attractive option in the long term – that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option… as people get more savings in their pockets, buying becomes the better option.”

What proof exists that owning is financially better than renting?

1. In a previous blog we highlighted the top 5 financial benefits of homeownership:

  • Homeownership is a form of forced savings.
  • Homeownership provides tax savings.
  • Homeownership allows you to lock in your monthly housing cost.
  • Buying a home is cheaper than renting.
  • No other investment lets you live inside of it.

2. Studies have shown that a homeowner’s net worth is 44x greater than that of a renter.

3. Just a few months ago, we explained that a family that purchased an average-priced home at the beginning of 2018 could build more than $44,000 in family wealth over the next five years.

4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment– along with a profit margin!!

Bottom Line

Owning a home has always been, and will always be, better from a financial standpoint than renting.

 


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Apartment Sector Boom Set to Continue in 2018 in Hunterdon and Somerset Counties

Apartment Sector Boom Set to Continue in 2018 in Hunterdon and Somerset Counties

Reposted from the National Real Estate Investor

As 2017 comes to a close, multifamily investors and developers are getting ready for another year of steady demand.

“Overall, we expect that same stability to hold in 2018, with occupancy and rent growth anticipated to basically mirror 2017’s statistics,” says Greg Willet, chief economist for RealPage Inc., a Richardson, Texas-based provider of property management and software services.

In 2017, multifamily developers opened a very high number of new units, but occupancy stayed high as demand for apartment rentals continued to grow. Rents also continued to rise, though certain cities and sub-markets faced some challenges. Next year, the amount of new construction is expected to slow down somewhat, but the overall trends are expected to stay the same.

Steady as she goes

In 2017, the apartment sector easily absorbed a huge amount of new construction. Developers have been opening close to 100,000 new apartments per quarter. That’s up by more than one third compared to earlier in the recovery.

The level of new construction is high even compared to the last real estate boom in the mid-2000s. Developers are still finishing new apartments at a rate approaching 400,000 a year. “There’s still lots of new supply on the way that will deliver in 2018, especially in the first half of the year,” says Willet.

And yet occupancy hovered around the 95-percent mark for most of the year. “The apartment sector’s performance results proved incredibly stable during 2017,” Willett notes.

The continued competition from new construction may finally make a small dent in occupancy levels in 2018. “Occupancy will begin to have a slight downward trend in 2018 as new supply is introduced,” says Doug Ressler, director of business intelligence for commercial real estate data firm Yardi Matrix. The percentage of vacant apartments averaged 95.6 percent at the end of 2017.

By the end of 2018, it will likely be at 95.4 percent, according to Yardi’s forecast.

Developers may also slow the pace of new construction as the year progresses. That would improve the outlook for 2019 and beyond. “It’s getting tougher to source individual development deals that work financially, so it wouldn’t be surprising to see starts drop somewhere in the range of 10 percent to 20 percent,” says Ressler.

Continued high occupancy rates will encourage property managers to hike their rents again in 2018. “We see national rent growth continue its positive climb in 2018,” says Ressler. Rents grew an average of 2.4 percent in 2017. In 2018, they will likely grow by 2.9 percent, Yardi forecasts.

Competition from for-sale homes may put a little more pressure on the apartment sector in 2018, but demand is expected to continue to grow as the economy expands, keeping occupancy rates high. In addition, the new tax framework may steer more people away from purchasing homes as certain tax benefits of home ownership are eliminated.

The strongest sub-markets and asset classes

Though the apartment sector overall will remain stable, certain markets and types of properties will be more hurt by competition from new construction.

Developers have so far concentrated their efforts on building luxury apartments, charging high rents to offset the high cost of development. That often means that new class-A apartments face a lot of competition. “It will be tough to achieve any rent growth for class-A properties in the neighborhoods where completions will be heaviest,” says Willet.

Developers have also concentrated on a handful of prime markets and sub-markets. “Those neighborhoods with the most intense concentrations of new supply on the way tend to still be in the country’s urban cores, although some suburban locations will add considerable new product, too,” says Willett.

The strongest markets may be those that are located close enough to the growing core cities to benefit from strong demand for apartments without suffering from competition from new construction. “Sub-markets adjacent to large metro and gateway markets are already seeing the influx of a ‘spillover affect’ in the rising rental demand. Good examples are suburban Atlanta, Tacoma [Wash.] and the East Bay (Oakland) [Cali.f] area,” says Ressler.

 


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Homeownership rate reaches highest level in three years in Hunterdon and Somerset County

Homeownership rate reaches highest level in three years in Hunterdon and Somerset County

But remains historically low

 

Reposted from Housingwire.com

The national homeownership rate reached its highest level since the fourth quarter of 2014, increasing slightly in the last quarter of 2017, according to the Quarterly Residential Vacancies and Homeownership report from the U.S. Census Bureau.

The homeownership rate remained statistically unchanged, inching up to 64.2% in the fourth quarter. This is up from 63.7% the year before and 63.9% in the third quarter.

The chart below shows the homeownership rate has been steadily rising since 2016, however it remains historically low.

homeownership

 

“After bouncing around near 50-year lows for the past few years, the national homeownership rate finally seems to be gaining sustainable, meaningful upward momentum,” Zillow Senior Economist Aaron Terrazas said. “The fourth quarter of 2017 was unseasonably strong, driven by buyers determined to make a deal in a highly competitive market.”

“And for would-be buyers struggling to save for a down payment or figuring out how to make the monthly mortgage math pencil out, changes in the tax code that potentially put more money in their pockets could be the push they need to move out of an apartment and into a first home,” Terrazas said.

Among Millennials, the homeownership rate ticked up slightly from 35.6% to 36%. Among older generations, the homeownership is significantly higher at 75.3% for those aged 55 to 64 years and 79.2% for those aged 65 years and older.

“What’s even more positive news for the housing market is that much of the increase in the homeownership rate over the past year has come from 18 to 44-yearolds,” Trulia Chief Economist Ralph McLaughlin said.

“Increases in homeownership amongst these two cohorts are a sign that the scars of the Great Recession are finally starting to heal, and provide a source of optimism that the owner-occupied segment of the housing market will continue to grow throughout the remainder of this economic cycle,” McLaughlin said.

Among the non-Hispanic white population, the homeownership rate increased from 72.5% in the third quarter to 72.7% in the fourth quarter. However, homeownership rates for other ethnicities are much lower.

The black homeownership rate increased 0.1 percentage point, but remains far below average at 42.1% in the fourth quarter. The Hispanic homeownership rate saw the highest increase, rising .5 percentage points to 46.6%.

This growth among the Hispanic population continues the trend outlined last year by the National Association of Hispanic Real Estate Professionals which showed the Hispanic homeownership rate accounted for 74.9% of the total net growth in the overall homeownership rate in the U.S.

The national homeowner vacancy rate decreased 0.2 percentage points from last year at 1.6%, while the national vacancy rate for rental housing remained unchanged at 6.9%.

 


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Buying A Home Is More Affordable Than Renting In 54% Of US Counties including Hunterdon and Somerset

Buying A Home Is More Affordable Than Renting In 54% Of US Counties including Hunterdon and Somerset

According to ATTOM Data Solutions’ 2018 Rental Affordability Report, “buying a median-priced home is more affordable than renting a three-bedroom property in 240 of 447 [or 54% of] U.S. counties analyzed for the report.”

For the report, ATTOM Data Solutions compared recently released fair market rent data from the Department of Housing and Urban Development with reported income amounts from the Department of Labor and Statistics to determine the percentage of income that a family would have to spend on their monthly housing cost (rent or mortgage payments).

Daren Blomquist, Senior Vice President of ATTOM Data Solutions had this to say:

“Although buying is still more affordable than renting in the majority of U.S. housing markets, the majority is shrinking as home price appreciation continues to outpace rental growth in most areas.”

However, the report also shows that the average fair market rent rose faster than average weekly wages in 60% of the counties analyzed in the report (266 of 447 counties). With rents rising, many renters should consider buying a home soon.

Bottom Line

Rents will continue to rise, and mortgage interest rates are still at historic lows. Before you sign or renew your next lease, let’s get together to help you determine if you are able to buy a home of your own and lock in your monthly housing expense.

 


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USAA members and their families can receive a substantial reduction on their next real estate transaction.