Renters twice as cost burdened as homeowners

 Residential Mortgage  Comments Off on Renters twice as cost burdened as homeowners
May 082019
 

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By G. Steven Bray

With all the ink spent on affordability in the last year, I found a recent study by Corelogic provided some novel insights. It found that housing costs in Austin for renters rose almost twice as fast as those for homeowners.

The study period was Dec 2005 to Dec 2018, so it roughly covers one full economic cycle. Corelogic compared its rental index, which analyzes the same rental properties over time, to a “typical mortgage payment,” which it calculates assuming a 30-year fixed mortgage with a 20% down payment.

In Austin, the rental index rose more than 60% over the study period while the typical mortgage payment rose about 35%. The difference between the two in Dallas and Houston wasn’t as large, but the rental index still rose faster. A part of this difference is attributable to the fact that mortgage rates in 2005 were a point and a half higher than they were last Dec.

And this reinforces another interesting point highlighted by Corelogic. Renters are almost twice as likely to be “cost burdened,” meaning 30% or more of their income goes towards housing expenses. Forty-six percent of renters were cost-burdened in 2017 as opposed to about 27% of homeowners. Moreover, the share is down 10 points for homeowners in the last 10 years whereas it’s held steady for renters. This highlights the fact that homeowners can leverage the market through refinancing to lower their housing costs whereas renters’ only recourse is to move to a less expensive (and probably lower quality) rental.

Here is a link to the study results.