Dive Brief:
- Real estate website Zillow reported that, in the country's largest housing markets, nearly 14% of renters with good credit and who can afford to buy a home are passing on homeownership.
- Many younger renters are putting off a family and children, delaying their need for a home, and hot job markets are attracting well-paid renters who take their time before deciding to buy in the area.
- While the markets with the lowest homeownership rates tend to have high numbers of qualified renters, metros with extremely tight inventory like Seattle and San Francisco also have a high number people with the income and credit to buy a home but who just can't find one.
Dive Insight:
Zillow added that markets most seriously affected by the housing crash — such as Bakersfield, CA; Fresno, CA; and Las Vegas — have very low numbers of qualified renters. Additionally, in a few markets like Rochester, NY, and Allentown, PA, renters with good credit don't make enough to buy a home.
"When faced with hurdles of high prices and low inventory, first-time homebuyers are renting longer than ever before even if they are qualified to buy," Zillow Chief Economist Svenja Gudell said in a release.
According to a Wall Street Journal report earlier this month, affordability is still the culprit keeping homeownership out of reach for many Americans. The continuous rise in home prices — combined with bad credit, student loan debt and strict lending criteria — is preventing 200,000 to 300,000 household each year from buying a home. This has contributed to the lowest homeownership rate (62.9%) in 51 years, but some economists have predicted that number could sink to 58% or lower by 2050.
As rents and home prices rise, the inability for renters to save for a home could create a permanent renter class that gives up their dreams of homeownership, according to The Journal.
Piling on to renter burden is the fact that developers are building more luxury units than affordable ones, resulting in increased rates for the lower third of the rental market that outpace the overall market. For example, in California last year, the rent for affordable apartments rose by 33%, while rents for the general market in the state increased only 7%.
