top of mind
Why Renters Can’t Make the Move
In August, rents spiked 3. 6 percent over
the same time a year earlier, the fastest
pace since 2008. As rental vacancy rates
fall across most parts of the country and
more jobs are created, they will continue
to jump further. This trend is both good
news and bad news.
Naturally, people collecting rents are
thrilled with the gains they’re seeing.
Both large apartment investors and
mom-and-pop landlords are enjoying the
best conditions they’ve seen in years. As
REALTORS®, many of you are among the
biggest beneficiaries; our surveys indicate about a third of you own investment
Of course, renters don’t like forking
over more money to be tenants. That’s
why, when rents rise strongly, it creates
demand for home buying. But that isn’t
happening this time. In fact, the share of
first-time buyers, who typically lead the
move from renting to owning, continues
to hover at near 30-year lows.
Rising rents are making it di;cult for
potential first-time buyers to become
owners, especially since rent increases
are outpacing wage gains. That means
more of a tenant’s income is being eaten
up in rent, making it harder to save for a
The weak wage growth is a conse-
quence of decade-long subpar economic
growth. Historically, U.S. gross domestic
product grows at a 3 percent annual rate.
But since the recession, growth has been
averaging only 2. 2 percent. A decrease of
0.8 percentage points might sound small
but, in an economy of $18 trillion, it has a
significant, cumulative impact.
Meanwhile, home prices are rising, in
large part because builders aren’t adding
new homes for sale at a rate matching
demand. Only 5 million single-family and
apartment homes have been built in the
last five years, even though 12.5 million
jobs have been added during that period.
The lag in construction represents
good and bad news. It’s helping to keep
rents and home prices up, but it’s making
home ownership more di;cult as tenants
struggle to save for the down payment
they’ll need to buy an increasingly costly
home. While the construction outlook is
unclear, until builders contribute to the
overall housing stock at a more normal
pace, home prices and rents will continue
Lawrence Yun is
NAR chief economist.
UPS AND DOWNS OF
HOME PRICES AND
Equilibrium between home prices and
household income helps keep the housing
market stable, although the two rarely line up.
Since early 2014, the gap has been widening
but at a more modest pace than in previous
years as home price gains have slowed.
Source: NAR Research
MARKET PULSE Home sales are outpacing last year’s sales, but tight inventories
and mortgage underwriting continue to weigh on the market. First-time buyers are slowly emerging
but make up just 30 percent of buyers, down from historical norms of around 40 percent.
EXISTING-HOME SALES Seasonally adjusted annual rate, which is the actual rate of sales for the month,
multiplied by 12 and adjusted for seasonal sales di;erences. 2014 data reflects final seasonal adjustments.
INVENTORY Number of existing homes on the market at the end of the month.
PRICE National median.
2. 29 Million
5. 31 Million
SUPPLY & DEMAND
All trend lines are from August 2014 to August 2015.
7/2015 6/2015 5/2015 4/2015 3/2015 2/2015 1/2015 12/2014 11/2014 10/2014 9/2014 8/2014 7/2014 6/2014 5/2014 4/2014 3/2014 2/2014 1/2014 12/2013 11/2013 10/2013 9/2013 8/2013 7/2013 6/2013 5/2013 4/2013 3/2013 2/2013 1/2013 12/2012 11/2012 10/2012 9/2012 8/2012 7/2012 6/2012 5/2012 4/2012 3/2012 2/2012
2012 2013 2014 2015
Median Home Price