If you read the headlines these days, you may get the sense that the entire concept of homeownership is under siege. It’s hard not to come to that conclusion after we read about rising home prices, potential bubbles on the horizon, increasing interest rates, and more. With all of this going on, why should we buy a house at all?
However, there’s one basic fact that resets the whole conversation, and should get smart consumers running (not walking) to come talk to me for a prequalification and then on to their favorite Realtor, and homeowners (and those same Realtors) sleeping well at night: renting is a no-win proposition.
In fact, rents are rising in most metro markets across the country. In California, they’re climbing at an eyebrow-raising rate. And there’s no place the cost to rent a home or apartment is skyrocketing more than Sacramento.
Today, let’s cover some of the newest data and trends on renting – an alternative so unattractive, you should be positively propelled to buy your own home.
To start, we’ll look at a recent survey by Yahoo! Finance that broke down the hourly pay wage you’d need to earn to afford the average two-bedroom apartment in that state.
They found that in California, it would take three people making minimum wage ($10.50 or $11/hour) full time to afford a 2-bedroom apartment across the state!
(It’s worth noting that they measure affordability by the accepted standard of 30 percent of one’s take-home income.)
Again, that means you’d have to have three people working full time at minimum wage to afford just the average 2-bedroom apartment here.
And for the average 1-bedroom apartment, a Californian would need to work 92 hours (every week!) to fit the cost under that 30 percent affordability threshold.
But California’s six million renters (about 46 percent of the state population) don’t even have it the worst for rising rents. The states where it’s most expensive to rent a 1-bedroom (and the hours at minimum wage to afford it) are:
1. Hawaii, 116 hours
2. Virginia, 109 hours
3. New York, 101 hours
4. California, 92 hours
If we look at working a normal 40-hour week, this these are the states with the highest hourly wages needed to afford an average 2-bedroom apartment:
1. Hawaii, $35.20
2. California, $30.92
3. Maryland, $28.27
4. New York, $28.08
No matter how you dissect the numbers, California’s rental market is pricey – and getting even more so. For instance, when it comes to median rent, California is home to 27 of the nation’s 28 most expensive cities, as well as 35 of the top 50 cities.
Our local greater Sacramento region is on the forefront of those rising rents. According to data by CoreLogic, Sacramento rental price increases have exceeded 10 percent each of the last two years.
And 2018 is even more alarming for renters, as a report by Apartment List found that rents have risen by 9.4 percent over just the last six months – a rate that’s double the California average (4.5 percent) and triple the U.S. average (3 percent.)
According to the Sacramento cost-of-living index, a 900-square foot accommodation (apartment or house) in a nice part of Sacramento will now cost you $1,729 per month, or $1,559 per month in a more working-class neighborhood.
With rapid downtown redevelopment, urban infill, employers moving to the area and home prices rising, the demand for affordable housing is further exerting upward pressure on rental prices. That trend will get far worse before it gets better.
According to Veronica Beaty of Sacramento Housing Alliance, “Sacramento County is facing a shortage of over 62,000 affordable housing units.”
If you’re still renting a home or apartment in the Sacramento area, get ready to fork over more of your hard-earned paycheck to your landlord every month, a trend that’s expected to increase with no end in sight.
The alternative to renting is buying a home, of course, and there are still plenty of affordable houses for sale in Sacramento, with great interest rates and fantastic low down payment options.
Contact me to get started – and avoid the rent crunch!