WASHINGTON (TND) — Rents have grown faster than wages in most of the country’s biggest metro areas over the last five years, adding to the squeeze on wallets consumers have felt since inflation skyrocketed during the pandemic and has remained above 2% into 2024.
A Zillow and StreetEasy analysis found rents nationally have grown 1.5 times faster than wages since 2019 in 44 out of the 50 largest metro areas. Since 2019, rents have grown 30.4%, while wages have gone up by 20.2%.
The trend cooled last year with wages finally outpacing rent growth by nearly 1% as asking prices slowed thanks to high construction levels, but consumers are still feeling behind after years of gains and higher prices on other necessities like food and fuel.
Multifamily construction, which includes apartment buildings and condos, went through a boom period in 2022 that brought thousands of new units that have hit the market over the last year as projects were completed. That momentum has slowed, with a 14% decline in 2023 and the National Association of Home Builders predicting another 20% drop in 2024 amid high interest rates.
Along with high rates that make it more expensive to take out construction loans and turn a profit on projects, builders are also dealing with a shortage of skilled labor that is also affecting construction in the single-family market.
Struggles with building enough housing is a longstanding problem in the U.S., which is facing a shortage of millions of units. A shortage of available houses, apartments and other places to live has helped ramp up price pressures that have materialized into one of the most unaffordable housing markets in the country’s history.
The national median price of an apartment in March was $1,987, according to Rent. Median rents vary by area, but there is a growing trend of unaffordability gripping renters that are also being priced out of ownership.
Of the approximately 39 million households that rent in the 100 largest metro areas, 19 million are rent-burdened, meaning that they pay more than 30% of their income to cover monthly rent, according to Zillow.
High rent prices come at the same time as the U.S. housing market is in one of its most unaffordable stages ever with listing prices averaging nearly $400,000 and elevated mortgage rates that add hundreds of dollars onto a monthly mortgage payment.
Higher incomes are becoming necessary to afford homes in a growing range of the country. An April report from Bankrate found six-figure incomes are required in nearly half of the U.S. to afford the typical home. Four years ago, only six states and the District of Columbia had that same qualification.
There are few signs of relief for renters hoping to buy a home, with existing single-family prices rising in 93% of metros in the U.S. during in the first quarter. The monthly mortgage payment on a typical home with a 20% down payment is $2,037 a month, a 9.3% increase from a year ago, the National Association of Realtors said Wednesday.
“In the current market, rising prices are the direct result of insufficient housing supply not meeting the full demand,” NAR chief economist Lawrence Yun said.
Those high prices are also having an impact on the rental market as more people are priced out of homeownership and into rentals, which adds upward pressure on rents with more demand. The new units hitting the market has slowed the rate at which rent is growing, but is still expensive in many parts of the country and leaves renters make difficult financial choices.
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