The burst of the housing market and the ongoing difficulties the industry has had in leveling out is a direct correlation as to why rent is skyrocketing in many parts of the country. In many places today, buying is becoming cheaper than renting. While purchasing real estate has consistently been a smart investment, the dip in housing prices is making people question when the market will really hit rock bottom. Since the housing market fell, the renting market has risen and the demand for rentals is consistently increasing. As Yahoo! Real Estate explained in their article, Ten Worst Cities for Renters, “Nearly half of renters pay more than 30 percent of their monthly income for rent, including 26 percent that pay more than 50 percent of income, according to a new report by Harvard University’s Joint Center for Housing Studies.”
People who were forced to leave their homes because of the recession and the crises that followed are now renting. This influx of people has caused rent to go up dramatically in many places. Typical high-cost places like New York City and San Francisco are not a surprise, but cities like Miami and Detroit are noticing an increase that many people may not have expected. Most of these people are paying more than half of their income just to rent. People continue to lose their homes and are forced to turn to rentals. Although the housing market is in poor shape, many analysts believe that most areas have not yet bottomed out.
Although the majority of people are unable to keep their houses because of the crash in the housing market over the past couple of years, many first time homebuyers, especially ones in the younger generations, are investing in foreclosed homes, condos, and townhouses. As The Wall Street Journal reports, “Economists predict the housing market is in for a slow recovery. Government incentives, such as the first-time homebuyer tax credit, helped home sales last year. But since its expiration, the housing market has faltered. Ultimately, it will take stronger income and job growth to inspire more families to purchase homes…” With the housing market at the lowest it will be for a long time, people who can afford to buy are smart to do so. Since home, condo, and townhome prices have virtually hit rock bottom in many parts of the United States, people who can afford to buy can invest in many parts of the United States- in places where they may have not been able to before.
Comparing renting to buying is still dependent on where you live. As Les Christie May of CNN Money writes, “Rents, though mostly stagnant the past few years, are expected to head higher as more people bitten by the housing bust turn to renting. Second, home prices have finally dropped enough to create a buying opportunity. Nationally, prices are down 32% from the peak. Many times renters end up spending their savings on rent and do not have any investments. Like May also states, for buyers, “The mortgage bill comes in every month, the homeowner pays it and the mortgage balance goes down.” All of this is true as long as the homes, condos, and townhomes gain their values back. Real estate is one of the smartest investments to make, especially at a time like the present.
