The American Dream of owning a home is still alive and well today in the United States, but it is increasingly under assault by a growing number of renters. For Realtors, the retreat from the American Dream of homeownership is a real threat to their bottom line. For home builders, who have seen their industry decimated the last five years, the ranks of new home buyers has withered as the recession, the foreclosure crisis, and shifting demographics have swelled the ranks of renters.
But one group is sitting pretty: landlords.
Rents are rising in places like San Francisco, Los Angeles and New York City, according to Jonathan Miller, president of New York-based Miller Samuel Inc. Rents in New York have been rising, Miller said. Miller, who compiles the Douglas Elliman Report, said: “Manhattan prices increased for the fifth consecutive month and reached their highest level for the month of July in six years.”
The average rental price in Manhattan is $4,022 a month. Manhattan studios fetch $2,573 a month, while a one-bedroom goes for $3,349. If you need more space, it’s going to cost you. A two-bedroom rents for $4,817, while a three-bedroom rents for $8,554 a month, according to the Douglas Elliman Report.
Homeownership Rate Plunges
While rents are rising in coastal markets like New York, home ownership rates are falling.
Historically, home owners have outnumbered renters in the U.S. by more than three to one. However, in the wake of the housing bust that brought on the Great Recession, the rate of home ownership has slid steadily — from its peak at 69.2 percent in the fourth quarter of 2004 to 65.2 percent in the fourth quarter of 2013, according to Census data. Some analysts say the U.S. may never return to its mid-decade housing boom peak in which nearly 70 percent of occupied households were owned by residents. Some industry watcher believe the rate could fall as low as 60 percent.
Renter Nation vs. American Dream
The flip side of declining home ownership is the growing ranks of renters. Nationally, there are now 43 million renter households or 35.4 percent of all U.S. households up from 31 percent in 2004, according to Harvard’s Joint Center for Housing Studies. Today, there are 4 million more renters than in 2007.
But the renters across the country are increasingly finding themselves cash strapped, paying a larger amount for rent as their shrinking or stagnant paychecks just to keep a roof over their heads. Rents nationally have risen by 6 percent over the past decade, Harvard reports.
Meanwhile, renters have seen their incomes plunge during the same period by 13 percent, the study finds. Over half of all renters now pay more than 30 percent or more of their income to their landlord, up from 12 percent a decade earlier, the report found.
Since the Recession, the renter share of all households in the United States has increased steadily from 34.1 percent in 2009 to 34.9 percent in 2010 to 35.4 percent in 2011. Nearly a quarter of the nation’s metro areas saw a rise in renting households, while less than 3.0 percent of the nation’s metro areas saw a decline, according to Census data.
With a surge in rental demand rental vacancies have fallen, rents have climbed and construction of new rental housing has picked up sharply.
But builders have not kept up with rental demand, especially among multi-family units.
What are your thoughts? Are the rents too high? Will rents fall?