"Housing is getting less affordable for everyone. After the last housing crash, enough homes were not built for a decade. That lack of supply is the biggest force pushing up the prices. Thus, making it harder for people to afford buying a house," Daryl Fairweather, Redfin chief economist, said.
The report included that rents are up more than 30 percent in Austin, Seattle and Cincinnati. In Los Angeles, the median asking rent is $3,400. Even in formerly affordable cities such as Nashville, median is now $2,140, which is 32 percent higher from last year.
Redfin's website posted: "It is important to note that the prices in this report reflect the current costs of new leases and new mortgages during each time period. The amount shown as the median rent is not the median of what all renters are paying, but the median cost of apartments that were available for new renters in May. Currently, the real estate's data from RentPath includes only the metro level. Future reports will compare median rent prices at a more granular geographic level."
Fairweather further stated that home developers built fewer homes in the last decade than in any 10-year period since the 1960s.
"I think it is going to take at least one more decade to get ourselves out of this hole," she said.
As a consequence, more people will be stuck to renting when they would rather own a home. "Rents are going up just as fast as home prices are," Fairweather said. To address the issue, she proposed changing zoning laws to allow for smaller, more affordable homes built closer together.
The higher demand for rentals from people who would rather buy a home is expected to continue. Mortgage applications to buy a house are 21 percent lower than last year as rising interest rates continue to rise.
Pandemic contributes to rental hike
New Silver, a direct lending company that provides loans to real estate investors, last month posted an article titled "Why is rent so high in 2022?" on its website.
The post listed a number of factors that contributed to why rent prices in the U.S. have been sky-rocketing for the last couple of years.
One of the factors is the impact of the pandemic that has reduced affordable housing options and the total supply of single-family homes. This just means that renting is becoming a more favorable option for many people, National Rental Home Council said. (Related: Commercial real estate market collapsing due to covid.)
During the pandemic, people had to move in with their families. And now, as the restrictions are being lifted, they are looking for their own homes again. This causes the increase in the demand for rental properties once again.
Subsequently, owners of rental properties put the rent prices up as the competition rises among potential tenants. Prices of the listed homes for sale continue to rise as well. So instead of buying a house, people just wait to find a house they can afford and rent in the meantime.
"The rental market is also being flooded with a new type of renter, one who is wanting to buy but simply can't find the right property right now," the review noted.
Additionally, millennials, being a generation that no longer see owning a home as a major life goal, are preferring to rent because this life choice serves their lifestyle better. The are generally less interested in being committed into a loan and would rather free themselves up.
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