Americans paid out $20.6 billion more in rent in 2014 than 2013 with sluggish income growth failing to keep up with increasing costs.
That’s according to recently released study from real estate company, Zillow.com, one of two studies that reveal rents across the country are on the upswing. Zillow analysts also determined that U.S. renters overall paid about $441 billion in rent in 2014 compared with an estimated $420 billion in 2013.
The Zillow analysis is based in part on data available locally and nationally from the American Community Survey and the Current Population Survey. It also includes estimates of the number of renter households based on 2013 metro-level data and current 2014 national data.
Zillow Rent indices in 2014 were also used to arrive at analysis estimates for rents paid.
The number of rental households rose 770,231 in 2014, according to Zillow, while the average monthly cost of renting rose nationally by $26 to almost $900. Some metropolitan areas saw larger cumulative rent paid amounts than others.
The largest cumulative rent was paid out in the New York-Northern New Jersey area at $50 billion while those in Birmingham, Ala., saw smallest cumulative total at $1 billion.
Real estate research firm Reis, Inc., also delved into the numbers renters across America are facing. That company’s analysts estimate apartment rents grew on the average by 3.6% in 2014.
It concluded that average monthly lease rates are $1,124.28, which is the highest amount seen by the firm since it began its market tracking in 1980. Reis researchers also noted an national vacancy rate of only 4.2%, which is the lowest seen since 2000.
Both Zillow and Reis predict that rental increases will continue in 2015, but Reis points out that the pace may slow somewhat. This is largely due in part to an upswing in apartment construction brining more of a supply online.
While growth in the rental market continues, Zillow’s chief economist Stan Humphries points out that over the past 14 years rent prices have outpaced income growth by twice as much, creating excellent opportunities for investors and rental housing owners.
The trend, however, has “been a bitter pill to swallow for tenants, particularly those on an entry-level salary and those would-be buyers struggling to save for a down payment on a home of their own.”
Humphries estimates 2015 will deliver another bitter pill to tenants as rents are expected to rise faster than average home values, which means another increase in total rent paid similar to 2014 is not only likely, “it’s probable.”
