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Disproportionately High Rents Spoil Homeownership Dream

by Peter Thomas Ricci

Many want to own a house, but the finances are only feasible for an increasingly select few

zillow-rent-buy-mortgage-monthly-rent-housing-affordability

It is a truth universally acknowledged that the vast majority of renters in America aspire to homeownership. Indeed, according to a recent survey from Freddie Mac, of the American renters who saw a rent increase this year, 70 percent aspire to own a home.

What that survey also found, though, was that same 70 percent of renters are unable to buy a home, and for a very simple reason that new data from Zillow has elaborated upon – rents continue to increase, and as a result, renters are unable to adequately save for a down payment.

In an analysis that compared mortgage payments to monthly rents in 2015, Zillow found that American homeowners commit 15 percent of their monthly income to mortgages, compared to 30.2 percent for rents; so rents are, in other words, twice as expensive in today’s housing market as mortgages. And here in Atlanta, the disparity is even stronger, with mortgage holders paying 12.9 percent to renters’ 27.2 percent.

Trapped in a Rental Spiral

Although it is tempting to look at Zillow’s analysis as confirmation of homeownership’s relative affordability, the data in fact speaks to the precarious place many consumers find themselves in with today’s housing market.

It is a problem that has many roots:

So though today’s record-low interest rates have rendered owning cheaper than renting, economic conditions have made it very difficult for Americans to capitalize on those benefits.

See our graphic below for a fuller picture of how housing costs differ across America:

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