School bells are ringing, as yet another summer is coming to an end and the back-to-school season is in session. It'll be another several months before classes dismiss again, but for the most part, that's fine with college students, as they like where they live.
At the same time, though, among Americans in general, many are at a bit of an impasse. Because as much as they enjoy where they reside, they're finding it increasingly difficult to afford it, according to the results of a new study.
Nearly three-quarters of renters say that they're for the most part satisfied with their residence and location, a recent poll conducted by professional services firm Avvo discovered. Additionally, a majority of respondents in the survey indicated they felt fortunate to have the place they did with inventory being quite limited.
It's this insufficient supply that may be the reason why rental prices are on the rise, and renters have taken notice. Approximately 70% said that they felt what they were paying in rent was too expensive, the poll found.
This is particularly true in the West. Over 3 in 4 respondents in the poll – 76% – believed that the cost to rent an apartment in this part of the country was approaching cost prohibitive territory. The same was true for the majority of Midwesterners, only to a lesser extent, with 63% believing rent levels were overly pricey.
Home prices also rising
It isn't just rentals that are demanding a higher portion of Americans' paychecks. National home prices have swelled consistently on a year-over-year basis, particularly in urban areas. During the second quarter, median existing single-family home prices rose in 83% of metropolitan statistical areas, according to newly released data from the National Association of Realtors. Between April and June, it cost the typical home buyer around $240,700 to purchase a median value home, nearly 5% more than the same three-month period in 2015.
Lawrence Yun, NAR Chief Economist, noted that the problem emanates from a lack of listings as well as limited construction activity among home builders.
"With homebuilding activity still failing to keep up with demand and not enough current homeowners putting their home up for sale, prices continued their strong ascent – and in many markets at a rate well above income growth," Yun explained.
Low-interest mortgage rates have also served as an attractive incentive for prospective buyers. For the entirety of 2016, 30-year fixed-rate mortgages have been going for less than 4% interest for prime borrowers, according to Freddie Mac. The last time 30-year FRMs were above this threshold was late 2015.
Even among rental markets that are more affordable, prices are increasing due to the lack of inventory. In the past 12 months, of the 15 locations analyzed by home listings website Zillow, 11 of them experienced double-digit increases in rent rates, including Dallas, Los Angeles, Philadelphia, Miami, Boston, and Charlotte.
Supply issues are largely confined to low-end apartments, Zillow reported from its findings. In 2014, when there was construction activity among multi-family units, they were predominantly in neighborhoods where asking prices run higher. Meanwhile, those with more limited means have had fewer options to choose from, including college students who are often cash-strapped.
"There's a growing divide in the rental market right now," said Svenja Gudell, Zillow's Chief Economist said. "Very high demand at the low end of the market is being met with more supply at the high end, an imbalance that will only contribute to growing affordability concerns for all renters. We're simply not building enough at the bottom and middle of the rental market to keep up with demand."
She added that increased competition is pricing both home buyers and renters out, an issue that can be resolved with increased development.
Construction picked up moderately in June
There are some encouraging signs that construction is ramping up. In June, the U.S. Department of Housing and Urban Development reported that housing starts climbed by nearly 5% on a seasonally adjusted annual basis. And among multifamily units, activity rose by 5.4% to 411,000.
"[The recent] uptick in production is an indicator that the housing market continues to move forward," said Ed Brady, Chairman for the National Association of Home Builders.
He added that red tape and bureaucracy partially explains why construction hasn't moved at a more rapid pace.
Though it may seem counterintuitive to purchase renters insurance when rates are high, neglecting to do so could cost you dearly, particularly if you're a college student with limited means and living off campus. Having to replace lost or stolen property out of pocket can be a difficult task that can be hard to absorb. Renters insurance provides protection from the unexpected. Plus, renters insurance is extremely affordable, especially when you bundle with another policy. Also, Elephant offers discounted rates to students who maintain a strong grade point average.
For more details on coverage renters or otherwise, please speak with an Elephant Auto insurance professional.