While most of this Zillow article is merely a sales pitch to convince broke and struggling Americans trapped in low paying jobs to buy homes they can’t afford, the small section highlighting how rents are historically unaffordable is pretty interesting. Zillow analyst Meredith Miller notes that:
Renters, on the other hand, continue to struggle. Renters making the national median income and renting the median-priced apartment should expect to pay about 30 percent of their income in rent, compared to roughly 25 percent historically. Of the largest 35 metros areas, Miami, San Francisco, New York, San Jose and Los Angeles have the biggest differences between current and historic rent affordability.
Rents are historically unaffordable in all of the largest 35 metro areas.
As I mentioned earlier, the entire purpose of even mentioning rents being unaffordable seems to be there to convince financially strapped plebs to buy a home. The argument is that mortgage payments are more affordable than rental payments. However, the catch seems to be that this assumes a 20% down payment. With a recent McKinsey survey noting that 40% of Americans are living paycheck to paycheck, I wonder where this mythical 20% will come from. My guess is that it won’t be coming, which is precisely why the U.S. government is moving to promote essentially 0% down home loans.
This becomes more apparent when you observe the chart in the Zillow article:
The price to income ratio does not show homes to be historically affordable, so I think you really need to combine the top chart and the middle chart (which assumes a 20% downpayment) to get a better picture.
What seems to be a more clear case is that rents have gapped to off-the-charts unaffordable levels. As Jimmy McMillian accurately noted four years ago in this classic: The Rent is Too Damn High.
In Liberty,
Michael Krieger
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Traditionally, the serfs do not own property. The US is becoming more like traditional Asia and Europe, where the wealthy elite own everything, and it will continue to do so.
For a few generations, Americans were able to live off the wealth that had been preserved by the First Peoples, in the form of taking care of the natural resources that were so abundant. It took a few centuries, but the trees have been cut down, the land farmed to excess, the large animals hunted down to a few specimens in zoos, the fish are gone, the waters are dammed and poluted, and the wealth that had been saved for tens of thousands of years wiped out in a few generations, as Americans spent their capital like drunken sailors on shore leave.
It’s gone. Get used to it. American’s aren’t rich anymore. How many property owners are there in Italy? In Singapore? The days of poorly educated, low-level employees being able to own their own land, own a car, send their kids to college, are gone. That’s a life-style of the CEOs and the top 20%. The bottom 80% are plebs.
This is the New Normal. People can continue in denial, or adjust their lifestyles accordingly.
I know what you are trying say, but you picked bad examples. Home ownership in Singapore is 90.5%. Italy 74.1%. US is 65.2. (2013 numbers, but close enough). Singapore only because of a socialist style home purchase program. If that’s what you want. I don’t.
Government is the reason for low home ownership in the US. Environmental interests have raised the cost of development. Cities/Counties have raised property taxes to astronomical heights. As usual, the government causes a problem and then proposes “solutions”. Which of course means more power and control for government. There are countries that have no property taxes. So you don’t rent your property from the government.
If you want more freedom, move to a country with as small a government as you can find. “More Freedom means Less Government: our Founders knew this well”. (Walter Williams). Don’t complain when you give up your freedom for a little security.