With Housing Costs Sky-High, Rental Homes Are Booming

By: Kaydee Ambas · May 17, 2024 · Reading Time: 2 minutes

Renting Boom

Housing prices are hovering near all-time highs, while mortgage rates remain stubbornly above 7%, according to the Case-Shiller Home Price Index. This has priced many out of homeownership, making renting their best — or only — option. Even higher-earning Americans are opting to rent, given the current state of the market. The housing affordability crisis is an ongoing challenge for many families hoping to reach this key financial milestone.

Builders are benefiting. There are nearly 100,000 new rental homes already under construction in 2024 to address the heightened demand. Rent for houses in particular has been trending higher than for apartments, and occupancy rates remain strong in the sector.

Housing Hurdle

In recent decades, median home prices have increased twice as fast as median incomes, if not more. Even with rent on the rise, this has made it a relatively more affordable option than homeownership. In March, the average mortgage was 38% more than the average monthly rent for an apartment, according to real estate services firm CBRE (CBRE).

That said, in this economic climate, renting still presents a financial hurdle for many households as well. In 2022, the median renter spent nearly 31% of their income on housing, per a 2024 study by Harvard University, a percentage the U.S. government considers a housing cost burden.

As Americans are forced to spend a larger share of their income on housing costs, it poses a risk to the broader economy by potentially reducing consumer spending elsewhere.

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