I bet that up to right about now, none of you have ever heard of a “housing burden.” If you are a renter or homeowner then it’s time you pay attention to the term. Every now and then, us gurus in the real estate/journalism world come up with all kinds of idioms and fancy words to describe different situations that affect the housing market, and this one is no different.
A housing burden is the percentage of which your rent or mortgage is taken from your yearly income. One’s housing burden should never exceed 30 percent; although, the national average is 26%. And yes, it should not surprise you that both are big numbers. After all, it’s almost a third of your income. What is alarming, however, is the fact that there has been a 3.4 percent rise in housing burden in just the past year with no end in sight. If the burden should eventually exceed 30 percent, you can expect widespread panic and another housing meltdown.
Not all states are affected by the housing burden crises, and therefore, not all Realtors, but Florida, as always, is right there in the thick of it. South Florida, in particular, ranks No. 1 among the largest 150 metro areas for housing burden as renters in the country. Yeah, I always knew that rent was ridiculously high down here, but never did I imagine the heights to which the rental rates would climb and how difficult it would be to find something, or anything, affordable for my clients.
A Crisis From a Crisis
The first question you have to ask is: How did this happen? The simple answer is during the foreclosure crisis, many former homeowners were forced to rent if they did not leave the area, which led to a decline in inventory, thus raising the rental rates. Now that the crisis is almost over, a lot of these people, whom we like to refer to as “boomerangs,” did not go back into the buying market as we suspected, but instead, remained in their rentals because they were either afraid, could not get a loan or the prices were just too high. As a result, renters new to the area are forced to take what is left over, and pay a premium to get into a house they might not have otherwise purchased.
Landlords, of course, are laughing all the way to the bank. They have never seen numbers like this. Why sell now when we can rent for big money? Where once you could rent a nicely equipped three-bedroom house for $1600, it now costs upwards of $2500. And you have to come up with three months up front just to move in – essentially the equivalent of a down payment. As a Realtor in the area, I too have felt the pinch. After all, I make half of my living renting property.
Like any of the other Realtors in the area, I am inundated with buyers and renters – something easy to come by in this golden age of Trulia and Zillow. If I cannot find these people a property, they essentially move on to another Realtor or drop the idea and shop on their own. Shopping these renters around costs Realtors, like me, more money than ever before because what used to take a few hours, now takes weeks! You do the math in gas alone. However, if you have the rental listing, it is essentially akin to a wildcatter striking oil in the middle of the Texas panhandle. You can name your price, pick and choose from the litter, and most importantly, wait for the renter to contact you and collect both sides. It can also be a debilitating setback for the Realtor on the other side, begging to get in. I have been there.