Big Jump in Americans Saying Renting Is Cheaper Than Owning
October 16 2018 - 12:24PM
Dow Jones News
By Laura Kusisto
More than three-quarters of Americans now view renting as more
affordable than owning a home, the latest sign that rising mortgage
rates and higher home prices will continue to pressure home
sales.
Some 78% of people now say that renting is more affordable than
owning, according to survey data to be released Tuesday by mortgage
company Freddie Mac. That's up 11 percentage points from only six
months ago.
The survey also indicates that demand for for-sale housing could
remain soft in the coming months. Some 58% of renters now say they
don't currently have plans to buy a home -- up from 54% in
February, according to Freddie.
Demand for rentals swelled after the recession, as millions of
families lost their homes to foreclosure and tight credit made it
difficult for young people to buy homes. Rents rose by double
digits in many cities and the share of families who couldn't afford
their rent swelled to record highs.
Meanwhile home prices plummeted and, for those who could qualify
for mortgages, it was a great time to buy.
But this year, that dynamic has reversed. Rent growth has slowed
in line with inflation in the last few quarters, as new rental
supply hits a three-decade high. At the same time, home prices
continue to grow significantly faster than incomes and inflation
and mortgage rates have risen nearly a percentage point from the
beginning of this year. That has made it significantly more
expensive to buy a home.
David Brickman, president of Freddie Mac and the head of its
multifamily division, cautioned that renting remains unaffordable
for many families. But buying lately has become even more
unaffordable.
"It's the worst of both worlds," Mr. Brickman said.
Two-thirds of renters say they have had difficulty affording
their rent at some point in the past two years, according to the
Freddie survey. Nearly nine in 10 renters in what Freddie deems
"essential" fields like health care and education say they have had
significant struggles to pay rent during the past two years.
Mr. Brickman cautioned that if more people decide to continue
renting that could eventually reverse the current dynamic and make
rents once again begin to rise quickly.
"I do worry that it may be short-lived, that it's some reaction
to rising rates, but the underlying demographic trends are not
slowing at all," he said.
Write to Laura Kusisto at laura.kusisto@wsj.com
(END) Dow Jones Newswires
October 16, 2018 12:09 ET (16:09 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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