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Houses are increasingly expensive, and the choices are so few that 62 percent of millennials who go house-hunting are apartment-hunting on the side, just in case. Renting has become such a huge default for Americans that 40 percent of families with children at home rent that home — more than at any time in recent history.
Renting used to be a good way to live while you socked away savings to buy a home, but the latest data from Zillow shows that’s no longer the case.
In fact, the real estate research firm concludes there’s a conundrum: Renters can’t afford to stay, but they can’t afford to move, either.
“Young buyers often start their careers in fast-growing cities in which the market is particularly tough — and they’re trying to save for a down payment while making record-high rent payments,” says Zillow chief economist Svenja Gudell.
These days, a month’s rent is as much or more than a mortgage payment, Zillow reports. Rents have been on the climb for more than a decade, increasing by 9.7 percent since 2005. Meanwhile, the renters’ incomes are up only 7.3 percent, according to Apartment List.
More than half of the renters who moved last year did so because the rent increased. But to find someplace more affordable, a quarter had to hunt for a place more distant than they had planned. And 37 percent of those who didn’t move said they stayed because they couldn’t afford to leave, Zillow says.
The median rent in the United States is $1,600, varying by region and market.
A two-bedroom rental in the nation’s largest 100 cities runs from a low in the $700s in Hurricane-ravaged Houston, Texas, and Wichita, Kansas, to more than $2,000 in hot real estate markets such as Boston, New York, and San Jose, Apartment List reports. Among those 100 largest cities, only 11 have seen rents decline over last year.
That’s why so many Americans are house hunting.
They see homeownership as a way to save money, avoiding rent hikes and building equity at once.
But U.S. home values have gone up 6.9 percent over the past year, according to Zillow, which is also forecasting that they’ll rise another 3.1 percent in the next year. The median asking price for a home on the market right now is $259,900 — when they sell, owners are getting closer to $225,262.
That has left millennials, the next big home-buying generation, in a bind. More than half make multiple offers on their first home and more than a third go over budget to land it.
Only 39 percent put down the optimal 20 percent down on their purchase. One in four but down the bare minimum of 5 percent or less — which consequently forces them into higher monthly payments that include private mortgage insurance.
Millennials say they’re having such a tough time scraping together that down payment that one in three gets help from friends or family to cover the sum. One in three buyers cobble together a down payment from multiple sources.
Their creativity has made them the largest generation of home buyers, pouring $514 billion in the U.S. housing market over the last year. And Zillow’s survey of more than 13,000 buyers, sellers and renters ages 18 to 75 indicates the generation coming into the market behind them, the so-called Generation Z, are just as resourceful and eager to buy homes.
Generation Z submit more rental applications, and wind up spending the least amount of time in the hunt.
“These tech-savvy, yet risk averse renters are bringing their social personalities home, desiring communal amenities geared toward bringing people together,” says Jeremy Wacksman, Zillow Group chief marketing officer. “They prefer living with others to living alone, and they put their vast social networks to work during every step of the rental search process.”
Published by Debt.com, LLC Mobile users may also access the AMP Version: Renter’s Dilemma: Can’t Afford To Stay, Move, Or Buy - AMP.