WALL STREET JOURNAL: …Renters can expect to pay 30.2% of their income on rent, according to a Zillow analysis of rental and mortgage affordability in the second quarter released Thursday. That is the highest percentage ever, said Zillow, which has data going back to 1979.
The number is significant in part because it shows rental burdens creeping past 30%, which economists consider an affordable proportion of income for people to pay on rent.
Between 1995 and 2000, renters on average spent just over 24% of their incomes on rents…
Rental affordability worsened in 28 of the 35 metro areas covered by Zillow. It remained especially poor in the New York area and pricey West Coast cities. Los Angeles renters could expect to pay 49% of their incomes in rent. San Francisco wasn’t far behind, with renters paying 47% of their incomes on rent… (more)
The article goes on to advise…
“For some renters there may be a way out: Buy a house. Mortgages remain very affordable. Buyers should expect to pay about 15% of their incomes on housing.”
Unfortunately this can be very short-sighted. With almost certain rising interest rates in coming years, home values will drop potentially trapping people in small starter homes or condos. In our new, volatile employment society renting often provides employees the flexibility to follow the jobs. Home ownership as an investment has become a dicey risk for many.