Surprisingly, people who rent their residence are most likely to be encountering financial problems, according to a recent study.
More than one in four renters spends at least half of their household income on housing and utility costs, according to a new analysis of Census data by Enterprise Community Partners. The number of renters who are constrained by growing household expenses has surged by 26 percent since 2007, now at 11.25 million.
“It means making really difficult tradeoffs,” says Angela Boyd, a vice president at Enterprise Community Partners, as quoted in a report by the National Association of Realtors.
“There are daily financial dilemmas about making their rent or buying groceries.”
Household incomes have not kept pace with rental increases. A recent analysis by NAR showed a gap between rental costs and household incomes that is widening to unsustainable levels across the country. NAR’s analysis showed that over the past five years a typical rent increased 15 percent, while the income of renters grew by only 11 percent.
In some parts of the country, renters are facing even greater hardships from escalating rental costs. In California, Florida, New Jersey and New York, more than 30 percent of renters are devoting at least half of their incomes to housing and utility expenses, according to the Enterprise Community Partners analysis.
At least 20 percent of renters in every state in the U.S. – except for Alaska, South Dakota and Wyoming – are facing similar high costs relative to income, the analysis found.
Other recent studies are also showing the hardships renters now face from escalating costs. The U.S. Department of Housing and Urban Development estimated that 12 million renters and homeowners spend at least 50 percent of their income on housing.
Q: Are mortgage rates still rising?
A: On May 14, Freddie Mac released the results of its latest Primary Mortgage Market Survey showing average fixed mortgage rates following 10-year Treasury yields to be higher and rising for the third consecutive week. At 3.85 percent, the average 30-year fixed-rate mortgage is just below the high for 2015.
Q: What are the most popular types of home remodeling projects in today’s market?
A: Bathrooms and kitchens are the primary targets for remodeling projects in today’s market.
“As the country’s financial footing improves, clients are better able to realize their home design dreams. While remodels prompted by repairs remain common, homeowners have more discretionary funds available for upgrades, and so better style, comfort and safety motivate more home improvement projects,” said National Association of Home Builders Remodelers Chairman Robert Criner.
Both bathroom and kitchen remodels were up 6 and 7 percent from 2013, respectively, rebounding strongly from historic lows in 2010. Bathroom remodels were cited as a common job by 78 percent of remodelers, marking a return to an all-time high.
From simple projects like window and door replacements to complex plans for whole home remodels and transforming basements into living spaces, most project types increased in popularity from 2013 levels.
Q: Is home flipping tapering off?
A: The practice by investors is still active, but diminishing. About 4 percent of all single-family home sales are for flipping, according to RealtyTrac’s Home Flipping Report.
The report shows that 17,309 single-family homes were flipped – sold as part of an arms-length sale for the second time within a 12-month period – in the first quarter, accounting for 4.0 percent of all single-family home sales during the quarter.
The share of homes flipped in the first quarter was the lowest since the second quarter of 2011, when 3.4 percent of all single-family home sales were completed flips.
Q: Is there still a problem with delinquent mortgages?
A: Yes, but the problem is easing. The delinquency rate for mortgage loans on residential properties consisting of one to four units decreased to a seasonally adjusted rate of 5.54 percent of all loans outstanding at the end of the first quarter of 2015.
This was the lowest level since the second quarter of 2007. The delinquency rate decreased 14 basis points from the previous quarter and 57 basis points from one year ago, according to the Mortgage Bankers Association’s National Delinquency Survey.
WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Reagan Presidential Library in Simi Valley, Calif.