– The Rent is Too Damn High – Zillow Report Shows Rents Unaffordable in All Top 35 Metro Areas (ZeroHedge, Dec 11, 2014):
While most of this Zillow article is merely a sales pitch to convince broke and struggling Americans trapped in low paying jobs to buy homes they can’t afford, the small section highlighting how rents are historically unaffordable is pretty interesting. Zillow analyst Meredith Miller notes that:
Renters, on the other hand, continue to struggle. Renters making the national median income and renting the median-priced apartment should expect to pay about 30 percent of their income in rent, compared to roughly 25 percent historically. Of the largest 35 metros areas, Miami, San Francisco, New York, San Jose and Los Angeles have the biggest differences between current and historic rent affordability.
Rents are historically unaffordable in all of the largest 35 metro areas.
As I mentioned earlier, the entire purpose of even mentioning rents being unaffordable seems to be there to convince financially strapped plebs to buy a home. The argument is that mortgage payments are more affordable than rental payments. However, the catch seems to be that this assumes a 20% down payment. With a recent McKinsey survey noting that 40% of Americans are living paycheck to paycheck, I wonder where this mythical 20% will come from. My guess is that it won’t be coming, which is precisely why the U.S. government is moving to promote essentially 0% down home loans.
This becomes more apparent when you observe the chart in the Zillow article:
The price to income ratio does not show homes to be historically affordable, so I think you really need to combine the top chart and the middle chart (which assumes a 20% downpayment) to get a better picture.
What seems to be a more clear case is that rents have gapped to off-the-charts unaffordable levels. As Jimmy McMillian accurately noted four years ago in this classic: The Rent is Too Damn High.