A recent report on Multifamily Executive.com can show one reason why renting has remained so popular and shows no signs of slowing anytime soon. In one of the country’s priciest real estate markets, home ownership is quickly growing out of reach for many. Home prices in California’s desirable Bay Area are more expensive than renting, according to a regular report done by Trulia. An earlier piece on USA Today.com lists other cities in which renting is more affordable and shows it isn’t just coastal cities. As home prices continue to rise, the multifamily industry has one more edge in housing. Investors should know that by finding and providing the right opportunity in the right area, they’ll likely set up an ideal home community for many residents.
Housing Prices Skyrocket While Rents Languish
According to the article in MFE, the data from Trulia has shown steady movement toward renting overtaking home ownership in the affordability war; however, this is the first time on record in the two cities profiled that renting has been markedly cheaper than home ownership. The report looked at both San Francisco and San Jose, two typically very expensive housing markets. Currently according to the reported data, the average home value in San Francisco is $1.39 million and the average home value in San Jose is $1.28 million. The Trulia economist is quoted as saying that although rents have come close before, the current conditions have created the environment where renting is now more affordable in these areas. With home prices rising quickly and what she refers to as “lifeless” rents, renting has overtaken home owning as being attractive for those looking to save on housing. How much did home values rise? In San Fran, they went up 14.2% while in San Jose they rocketed up by a whopping 29%! Meanwhile, comparatively rents in the same two cities did not keep pace. They actually fell by 3% in San Francisco and were unchanged in San Jose.
Plenty of Company
According to a piece that appeared previously in USA Today, while nationally it’s still cheaper to buy than rent, there are plenty of cities similar to the two West Coast examples we noted. Depending on the area and rising home costs, renting is coming up roses in many large cities. While many of them are on the West Coast, the trend continues across the country. USA Today lists some of these cities as:
Los Angeles, CA
San Diego, CA
Sacramento, CA
Seattle, WA
Portland, OR
Las Vegas, NV
Phoenix, AZ
Baltimore, MD
Denver, CO
Washington, DC
St. Louis, MS
Dallas-Ft.Worth, TX
Charlotte, NC
Currently, the housing market is steaming along with rising home costs, little inventory, and higher cost of materials driving up the rate for new construction. All these factors may soon make renting more appealing, as well as affordable, in many other markets that have not made one of these reports…yet. The multifamily industry is well-placed to attract residents who either cannot manage the cost or do not want the cost burden of home ownership; under current conditions, renting has only grown more attractive to a wide variety of residents.
