Cost of Living Higher for Renters

Posted by Jim DeBellis on May 21st, 2011

So, here’s the dilemma for millions of Americans: The general economic crisis has left them with no cash for a down payment, and bouts of unemployment or job insecurity have left them with poor credit and an uncertain income. Those are the main reasons people give for being shy of the housing and mortgage markets – but families still need somewhere to live. The problem is that it is generally much more expensive to rent that it is to own. So, how can people too economically distressed for home ownership afford to live as renters? The short answer is that they cannot.

It’s a great time to buy a house, with bargain prices and historically low interest rates, but the only ones who can afford the American Dream are cash rich investors and those with unblemished credit. As they buy up the housing stock they continue to drive up the cost of renting the American Dream. According to Mortgage News Daily, rents are expected rise another 3.2 percent this quarter following a 2.8 percent increase last quarter, which represents an annual rise of about 12 percent. And this is while incomes remain flat, unemployment languishes around 9 percent, and gas and food are inflating the dollar at at double-digit rates.

Still, it is smart business to buy homes in this market, as long as you plan to hold on to them until valuations start to rise again. Whether this is housing heaven or hell depends which side of the equation you are on. But one things seems certain: The road to recovery for those forced out of the home ownership market will be longer and steeper than for those who have enough cash and credit to weather the storm in their own more cost-effective home.