Given that the pandemic upended the economy, it should come as no surprise that things are still, well, just a little off — especially in the housing market. And according to research by real estate site Zillow, things are about to go downhill for renters.
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By the end of 2021, Zillow expects the typical American renter to become "housing-cost burdened." That means that they'll spend more than 30% of their income on rent, putting strain on their budget for other living expenses, such as food and transportation.
"That 30% threshold is not just an arbitrary number . . . previous Zillow research found that once a community's median rent affordability figure exceeded 32%, local rates of homelessness and housing insecurity should also be expected to begin rising precipitously," states the report.
The growth of the housing-cost burdened population usually happens when income levels do not increase in tandem with housing costs, creating instability that can quickly get out of control.
Typically, one escape path for renters is saving up for a down payment and becoming homeowners — a goal that is difficult to achieve under normal circumstances, but practically impossible to achieve when you're housing-cost burdened. And things are looking bleak on that side of the market, too.
"In June, a home buyer earning the typical homeowner income and looking to buy the typically valued U.S. home with a 20% down payment and a 30-year, fixed-rate loan at prevailing rates slightly less than 3% should have expected to pay just 19.4% of their income on a monthly mortgage payment," states the Zillow report. "But by the end of the year, assuming home values grow in line with our forecast, that burden could rise to more than 23.1% in just the next six months, depending on the path of mortgage rates going forward."
Whether you're renting or looking to buy, your best bet to find stability is to leave more expensive cities for more affordable ones, but Zillow acknowledges that that solution isn't feasible for many, especially as remote work policies end.
Alternatively, the report suggests that "increasing the supply of more affordable housing units — including high-density housing such as townhomes and condos — can also help to ease some of the price pressures for many who find current values unreachable."
Read the full Zillow report here.
Stefanie is a New York–based writer and editor. She has served on the editorial staffs of Architectural Digest, ARTnews, and Oyster.com, a TripAdvisor company, before setting out on her own as a freelancer. Her beats include architecture, design, art, travel, science, and history, and her words have appeared in Architectural Digest, Condé Nast Traveler, Popular Science, Mental Floss, Galerie, Jetsetter, and History.com, among others. In another life, she'd be a real estate broker since she loves searching for apartments and homes.