(markewatch) -- Even the rich gotta rent.
The affluent are increasingly renting, according to multiple studies. Indeed, renters earning $150,000 or more per year were the fastest-growing group of renters, according to a recent study by apartment listing site RentCafe.com, which analyzed pricing and demographic data from the U.S. Census, real estate listing sites Redfin and PropertyShark, and apartment real estate research firm Yardi Matrix.
“Between 2007 and 2017, top-earning renters increased by 175%, while homeowners within the same income bracket exhibited a 67% growth rate,” the RentCafe.com study revealed.
“Out of the 43.3 million renters nationwide, 2.1 million are top earners according to the latest available U.S. Census data. Back in 2007, there were only 774,000 high-income renters.”
“There has been a change in the attitude toward home-owning after the financial crisis, particularly amongst higher income households.”
A 2018 study from the Joint Center for Housing Studies of Harvard Universityalso found that high-earners were increasingly renting. The number of renters with incomes above $100,000 rose 5% in 2017, “bringing the cumulative increase in 2012–2017 to about 2.6 million,” the report revealed. Furthermore, the rentership rate in that income bracket hit an all-time high (19%) in 2017 with higher income households accounting “for the vast majority of renter growth over the past five years.”
Of course, lower-income people still make up the majority of renters (two-thirds of renter households earned less than $60,000, the Harvard study found) and plenty of rich people are snapping up homes. But this growing number of affluent renters tells us something about the housing market.
“The barrier for entry [into the housing market] is higher than it used to be,” said Trulia’s chief economist, Issi Romem, who added that home prices have risen and lending standards remain tighter than before the recession.
That often means that even the affluent can’t afford to buy. “If you’re living in one of the more expensive parts of the country like a coastal city, this could be especially true,” he adds. While in the past 10 years, the median value of homes in America has increased nearly 30% to $223,000, according to Zillow data, in San Francisco prices have increased nearly 90% in the past decade.
In New York, they’ve gone up 46%, and in many other cities you will need to earn a six-figure salary to buy. And many younger consumers, even those who make bank, are saddled with student loan debt, which makes it harder to save up to buy.
Plus, as Marketwatch reported, there are now “a litany of hurdles for any would-be buyer to overcome, from rising mortgage rates to a lack of affordable supply,” which means that “it’s not getting any easier to buy a house, and more Americans may just give up.”
Some affluent people simply don’t want to buy. “There has been a change in the attitude toward home-owning after the financial crisis, particularly amongst higher income households,” says Tendayi Kapfidze, the chief economist at LendingTree, who adds that their interest in buying a home has “declined consistently since 2013.”
The reasons for this aren’t clear, but Kapfidze adds that “many people just prefer to rent because of the flexibility.” And Doug Ressler, a senior analyst at Yardi Matrix, adds that renting may be a particularly attractive option for the affluent because in recent years, there has been an influx of high-end rentals with plenty of amenities being built.
