Dive Brief:
- The National Association of Realtors has revealed its list of metros with the largest share of renters who could qualify to buy a home.
- Nine of the 10 markets are in the South and Midwest and have higher-than-average job growth, along with more than 28% of renters with qualifying incomes.
- These metros buck the trend in many areas of the country, which has seen skyrocketing rents preventing tenants, whose incomes cannot keep pace, from saving enough to make the jump into homeownership.
Dive Insight:
NAR Chief Economist Lawrence Yun said that renters in the metros on the list have seen enough hiring and income growth to be able to overcome high rental rates and make the transition to homeownership. These buyers, he said, are helped along by Southern and Midwestern home values, which are still lower than those in much of the country. Potential buyers in these "affordable, middle-tier" metros are in a position to take advantage of these market conditions, as well as current low mortgage rates, he noted.
The 10 top metros on the NAR list include:
- Toledo, OH (46% of renters can afford to purchase a home)
- Little Rock, AR (46%)
- Dayton, OH (44%)
- Lakeland, FL (41%)
- St. Louis (41%)
- Columbia, SC (41%)
- Atlanta (40%)
- Columbus, OH (38%)
- Tampa, FL (38%)
- Ogden, UT (38%)
According to a recent Zillow report, luxury rental units aren't the only apartments commanding higher prices. The real estate data site reported last week that median rental rates are climbing faster for units in the bottom one-third of the market than they are for rental units overall. Lack of affordable apartment construction and a builder focus on developing luxury complexes are to blame, according to Zillow.
Further stacking the deck against renters today is the fact that rents, when adjusted for inflation, have risen 64% since 1960, while income has increased only 18%, according to an Apartment List analysis of June U.S. Census Bureau data. Combine that fact with a higher construction price tag, costly regulatory requirements and increased demand in urban areas, and it's very difficult for average wage earners to afford an apartment, much less pay rent and save for a home down payment.