Rent is Due
How long will it take you to afford a home? If I asked you this question 3-5 years ago when the housing market was less hot, your answer might be a lot different. For many, the prospect of buying a home is now becoming unlikely due to rising housing prices and substantial demand. And as housing prices rise, so do rent prices, making it even more difficult to save for a home.
Historically, housing and rental markets tend to move in unison. When demand for homes increases, part of that demand spills over into the rental market, as those who want to buy homes but can’t afford them continue renting, driving up rental costs. A consequence of these increased rent prices is that it will take longer to save up for a home.
According to real estate firm Redfin, average rent prices in December 2021 were up 14% from December 2020. In cities like Austin, New York and Portland, rents increased as much as 40%. And to add fuel to the fire, the Federal Reserve Bank of New York predicts rents to rise about 10% this year.
If you’re spending more money on rent, you won’t be able to save as much for a down payment on your dream home. And being a homeowner is a major way for Americans to grow their wealth. When all of this is taken into consideration, the average American renter will need more time and money to purchase a home. According to Zillow, it now takes a year longer for the average first-time homebuyer to save for a 20% down payment than it did only five years ago.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
