US will ‘become a renter nation,' says real estate investor
Rising home prices are keeping potential buyers away from home ownership - and some investors say this could be good for the rental market.
High demand, low supply and low mortgage rates have pushed property prices to historic highs this summer. And for every $ 1,000 price increase, roughly 150,000 potential buyers are priced out of a home purchase to keep them in the rental market.
"Homeownership is still dead in this country because the only people currently buying houses are people with equity, good loans and a job," multi-family home investor Grant Cardone told Yahoo Finance.
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House prices typically fall in the fall, but median house prices hovered near the summer highs of $ 350,000 last week, up 12.9% in the week ending October 3 over the same time last year, according to Realtor .com.
"If you keep raising prices, people will be priced out. There's no getting around that," said Ali Wolf, chief economist at Meyers Research, a California-based market data company.
Meanwhile, rents fell this summer, making homes even more desirable and accessible for Americans during the pandemic. According to Zumper, the national average rental price for a one-bedroom apartment declined by 0.1% to USD 1,231 compared to the previous month after a summer of frozen rental prices.
"We're going to be a tenant nation in this country," Cardone said. "Renting is becoming an economical and desirable choice again ..."
Buy or rent red shoes from above on the white arrows, dilemmas concept
Americans - especially renters - have lower credit scores, higher unemployment rates, and fewer savings for a down payment than they did when the pandemic started. Tenants were more likely to fall behind with rent payments and more likely to lose their jobs during the pandemic, according to Nerdwallet, a California-based personal finance firm.
“There is an overlap between those who are most likely to rent and those who are most likely to be unemployed. For example, younger people and those who work in the hotel and food industries have higher rental rates and are more likely to have lost their jobs during the pandemic, ”said Elizabeth Renter, data analyst at Nerdwallet.
Meanwhile, lenders have placed heightened demands on slowing home demand as they scramble to add a record $ 3.9 trillion in credit this year, according to a forecast by Fannie Mae.
"Homeownership is driven by the upper class," Cardone said. "You need a secure job. They [the banks] are going to look at how you actually went through March, April, May and June with your job. If that was even a little suspicious, you won't get a home loan ... you need it better credit than before COVID and need to secure a job. "
Sarah Paynter is a reporter for Yahoo Finance. Follow her on Twitter @sarahapaynter
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