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Renters paid more for housing in 2018 than they ever have before

According to a new report from HotPads, U.S. renters paid a record $504.4 billion in rent in 2018, topping 2017’s total by $12.6 billion. According to the report, there were approximately 43.2 million renter households in the U.S. this year, nearly 100,000 less than there were in 2017. But despite that decrease, renters still paid out a record high total in rent in 2018, more than the entire GDP of Belgium ($494.7 billion), as rents rose throughout the year. According to the HotPads report, the current median rent is $1,475, up 3% from a year ago. In fact, the total rent increased year-over-year in nearly every major market included in HotPads report, with only Pittsburgh, Pennsylvania; Austin, Texas; and Oklahoma City, Oklahoma showing yearly declines in total rent paid out. Of the 50 largest metro areas in the U.S., renters in the New York City metro area spent the most on rent this year – a total of $55.6 billion, which represents more than 10% of the entire national total. Other markets are still seeing hefty increases, especially those in the Southeast and Southwest. And with rents forecasted to continue growing in 2019, driven by higher mortgage interest rates likely keeping some renters from becoming buyers, that total will likely increase next year. “After several years of a booming economy, more Millennials became financially able to become home owners in 2018,” Joshua Clark, economist at HotPads, said. “However, rent affordability continues to be a challenge, as those who still rent are paying even higher prices now than they were a year ago,” Clark continued.

Homelessness accelerates in expensive rental markets

As more and more Americans become rent burdened, the homeless rates in the nation’s most unaffordable markets continue to grow, according to the latest data from Zillow. According to the company, a renter earning the median U.S. income of $61,240 and renting the median-priced apartment of $1,442 is expected to spend about 28% of their income on rent, increasing from the historical norm of 26%. (Image courtesy of Zillow, click to enlarge) Notably, when the rent burden increases by 2 percentage points, Zillow points out that about 1,500 more people are driven to homelessness. Zillow gathered this data in collaboration with researchers at the University of New Hampshire, Boston University School of Social Work and the University of Pennsylvania. The data reveals that the effects of a larger rent burden are “more extreme” in markets where renters are already spending more than 32% of their income. Zillow Director of Economic Research and Outreach Skylar Olsen said although the nation’s homelessness rate has fallen, some communities still grapple with affordability. In these areas, the median market rate rent consumes 62.9% of the area's median household income. Notably, this cluster is home to 15.1% of the total U.S. population but hosts a whopping 47.3% of the nation's homeless population. “But there are similarities that can be identified, even among communities of wildly varying sizes and locations, and learnings to be shared." You can read more about the report here.

Redfin: Homes keep getting cheaper

In October home sale prices climbed 4.5%, however the percentage of listings that had a price drop of more than 1% reached an 8-year high, according to new data from Redfin. This October, home sale prices reached a median of $297,200, increasing 2.4% from the previous month, Redfin explained. Redfin also reported that 32 of the 71 largest metro areas saw home price increase from September, attributing this growth to home sales shifting to more expensive areas, rather than individual homes increasing in value. “Some homebuyers are adjusting their price range down, and others are backing out of home-buying entirely–deciding that renting is a better deal." “Sellers are now realizing buyer demand isn’t what it used to be and are dropping their prices. Notably, the number of homes for sale increased 1.3% from 2017, reaching the highest level of inventory growth since September 2015. The U.S. Census Bureau announced that residential construction spending was at a seasonally adjusted annual rate of $556.4 billion in September, 0.6% above the revised August estimate of $553 billion. Fairweather said that for the remainder of 2018, Redfin will examine how the California wildfires impact national housing market trends. “The fact is that rising mortgage rates and high home prices have a bigger long-term effect on the local housing market than the fires’ destruction.” As of today, the most recent California wildfires have claimed the lives of 63 people and destroyed more than 135,000 acres. You can read more about the devastation here.

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Are rent prices cooling off?

A new rent price report from apartment search site Abodo says that rental rates nationwide are stabilizing. The monthly report, released Thursday, showed that median prices for one-bedroom units throughout the U.S. fell a “statistically insignificant” .08% from October to November this year. The median price for two-bedrooms fell .24%, according to the report. As far as two-bedroom units go, the rent market of Scottsdale, Arizona, led with a 6.2% increase; city's a median rent was $2,676. The market that saw the largest decline? Cleveland, with a 11.8% loss for November, saw rent drop to $751 from $851, according to the report. Abodo added that it sees this deflating trend for rents increasing through December and the end of the year. From the report: As we had mentioned last month, we thought that rents, though they might fall, would not drop dramatically in November and this has verified. While a few cities showed significant swings, November was basically flat, and we see that trend continuing into December. With competing factors at work, however, we still feel that December will not show broad national average median rent changes.

Home Builders: Baby Boomer home sales disappoint

Builder confidence in the housing market for those 55 years of age and older is slipping, highlighting a recent trend showing that Baby Boomers are staying put rather than downsizing. According to the latest Housing Market Index from the National Association of Home Builders, sales of single-family homes to those over age 55 declined seven points to 60 in the third quarter. But builders aren’t completely down on the market as a reading above 50 indicates that the sentiment is good, whereas a score below 50 means confidence is poor. All three measurements of the single-family market for the 55-plus set saw a decline. NAHB's 55+ Housing Industry Council Chairman Chuck Ellison said part of the problem is that some builders are having trouble producing homes in the budget for prospective buyers in this age bracket. A study released by Trulia in September revealed that seniors are holding off on downsizing, with just 5.5% of those surveyed saying they had moved. Of those who did, the split between single-family and multifamily dwellings was pretty even. A second study released earlier this month by First American revealed that the median tenure for homeownership has jumped to 10 years, up 10% from last year. First American Chief Economist Mark Fleming also pointed to rising rates as the culprit and suggested it will increase the incentive to use a home equity line of credit for renovations. “As rates rise, many existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate,” Fleming said, adding homeowners who choose to stay put might look to access their equity in other ways."

Rent just hit an all-time high… again

With more and more renters feeling the affordability crunch, there seemed to be some light on the horizon recently with the steady rise in rents appearing to finally slow down over the last few months. Nevermind. As it turns out, rents are still going up and just hit an all-time high, again. According to the Census data, the median asking rent during the third quarter was $1,003, an increase of $52 over the second quarter and an increase of $91 over the same time period last year. (Click to enlarge. In the Northeast, the median asking rent rose from $1,134 in the second quarter to $1,210 in the third quarter. The largest year-to-date increase is actually in the South, where rents have climbed from $907 in the first quarter to $973 in the third quarter, an increase of $66. Rents in the West have also risen, from $1,345 in the first quarter to $1,382 in the third quarter, an increase of $37 this year. So, despite falling in the Midwest and the Northeast, rents went up in the South and West, and all that added up to a $49 increase in rents this year. The median asking sales price for homes is going up as well.

Millennials drive homeownership rate increase in Q3

The homeownership rate increased slightly in the third quarter, driven primarily by a jump in first-time homebuyers. This is up slightly from 64.3% in the second quarter and from 63.9% in the third quarter of 2017. “Their homeownership rate is up a whopping 1.2% since Q3 2017 to 36.8%.” Homeownership among those under age 35 increased from 35.6% in the third quarter 2017 and 36.5% in the second quarter this year to 36.8% in the third quarter 2018, the report showed. Meanwhile, those ages 35 to 44 years dropped from 60% in the second quarter to 59.5% in the third quarter. This is also still up from 69.1% in the third quarter of 2017. Those ages 65 years and older saw an increase from 78% in the second quarter to 78.6% in the third quarter this year, however this is down slightly from 78.9% in the third quarter of 2017. That is more than the pace of household formation over the same period, meaning that the transition from renting to own is the more powerful driver of housing demand.” “That has also been an important and often overlooked reason for the rapid rise in home prices, as more buyers came into the market,” Liu said. These events caused the homeownership rate and home sales to diverge this quarter.” The Hispanic homeownership rate saw a quarterly drop as it fell from 46.6% in the second quarter to 46.3% in the third quarter. Among whites, the homeownership rate increased from 72.5% in the third quarter of 2017 and 72.9% in the second quarter this year to 73.1% in the third quarter of 2018. Blacks also saw an increase from last quarter, rising from 41.6% to 41.7%, however the rate dropped from last year’s 42%.

This real estate market will see almost 12% in appreciation

The report, which covers the residences of 82% of the U.S. population in 358 MSAs, also forecasts an average rise in property values of 4.5% for the 100 most populous of them, a tenth of a percent increase over last quarter's number. In the top markets the housing supply is very low, which puts project price changes at the high end of the report. The Bremerton market remains one of the strongest markets in the country, with its extremely low 1.4-month supply of homes struggling to fill the demands of its growing population. Its predicted 11.7% appreciation is six-tenths of a percent higher than the top-ranked market in our VeroFORECAST reports in first and second quarter 2018. Here are the 10 markets at the top of the VeroFORECAST for the year beginning September 1, 2018: Bremerton-Silverdale, Washington, 11.7% Boise City-Nampa, Idaho, 11.2% Las Vegas-Paradise, Nevada, 10.8% Bellingham, Washington, 10.6% Olympia, Washington, 10.3% Carson City, Nevada, 10.1% Reno-Sparks, Nevada, 10% San Francisco-Oakland-Fremont, California, 9.6% Denver-Aurora-Broomfield, Colorado, 9.5% Seattle-Tacoma-Bellevue, Washington, 9.3% We predict that both single-family residences and condos/townhomes in the Bellingham, Washington MSA will appreciate on average by 10.6% over the next 12 months. The other three or four spots have been divided each quarter among the same five states: California, with an MSA in each quarter's Top 10, and Colorado, Idaho and Oregon with an MSA in two of the three reports. With Boise City-Nampa, Idaho jumping into the Top 10’s second spot with a projected appreciation rate of 11.2%, we see an indication of Idaho's changing economy. In California, the San Francisco-Oakland-Fremont MSA has a 9.6% appreciation rate forecast, while Colorado's large Denver-Aurora-Broomfield MSA is predicted to see average real estate prices go up by 9.5%. Eric Fox is VP of Statistical and Economic Modeling at Veros Real Estate Solutions.

Housing options disappear for low-income renters

The study compares changes in the number of renters in five income levels between 2006 and 2016 with changes in the number of unites that would be affordable for people in that income range over the same period of time. However, these high-income renters are not in a crisis. Not an option for lower income families. Housing is a growing, the real struggle is for low-income renters, who did not just outpace the rate of rental unit growth – they actually saw a decrease in the number of units they can afford. Click to Enlarge “New supply is clearly not coming online at these low rent levels,” JCHS stated in its report. “Moreover, not enough existing units are filtering down to counter those lost to abandonment, higher rent levels, or conversion to higher-end condominiums. In September, the national average rent decreased, if only just slightly, for the first time in eight months. However, as interest rates make buying a home even less affordable, more and more consumers may be turning to renting as their only option. This could create even more pressure in an already competitive market. “We’ve seen supply finally start to catch up at the high end,” Schuetz said.

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Own A Home? Renters Get More Sleep Than You

Apparently, renters are a well-rested bunch. According to a new analysis from Apartment List, renters sleep a generous 8.4 hours every night—a whopping 85 more hours a year than homeowners get. But that’s not the only perk of non-ownership, according to the study. Renters also spend more time on socialization, entertainment and leisure activities and—even better—they clean less and spend fewer minutes on chores, too. In total, renters spend an average of 3.5 hours a day on socializing and leisure, with TV taking up more than half of that. Though it’s easy to dismiss the stats as a difference in lifestyles or family sizes (homeowners are typically more likely to have children than renters), the analysis considered that, too. Overall, the most noticeable disparity appeared in the housework area. That’d be lawn care (48.6 more hours per year than renters), maintenance and repairs (30.4 more hours), cleaning (18.25 more hours) and food prep (18.25 more hours). It’s not all bad to be a homeowner, though. According to the analysis, commute times are shorter for owners than renters, and homeowners also work less—about 24 fewer hours at the office across the year.