- In July, the median apartment rent in the US climbed 39% from 2021.
- For many renters, it now exceeds what financial experts recommend spending on housing.
- As rents and home prices climb, Americans have fewer affordable housing options.
Rents are soaring — and that means even more Americans will have a difficult time affording housing.
According to rent.com, the US median rental price for a one-bedroom unit climbed to $1,770 in July, spiking by 39% from just one year prior. The price of two-bedroom unit also climbed 38.3% year-over-year to $2,106.
For Americans earning the national median income of $67,521 a year, the average rent works out to more than 30% of their pre-tax pay. That's above what financial experts recommend budgeting for housing.
"Year-over-year increases continue at a steady pace, blowing past the 30% barrier for both bedroom types," Jon Leckie, a researcher with rent.com, wrote in a rental report.
Early in the year, housing experts predicted that rent increases were likely to slow throughout 2022. However, rents have yet to stabilize as volatility in the economy seeps into the housing sector. It's kept housing costs high — to the dismay of both renters and homebuyers.
"Experts had expected the end of summer to usher in a period of moderate price increases," Leckie said. "So far, that hasn't been the case as prices and inventory in the housing market remain strong and mortgage rates are volatile."
Prospective homebuyers' struggles are adding to renters' woes. As inflation and interest rate hikes put pressure on housing costs, more Americans are having a difficult time affording homeownership, with buyers of a median-priced home are looking at monthly mortgage payments more than $400 higher than they were just a year ago. The uptick has priced out many would-be buyers, leading to increased rental demand — and ultimately higher rents across the nation.
"We've had a shortage of both multifamily and single-family housing for many years, and in a period of high inflation that's made it very challenging to find a home for too many households," Kevin Palmer, head of multifamily at Freddie Mac, told Insider.
High rents are making Americans reconsider homeownership
With both rents and mortgages still rising, many Americans have been left to wonder which option is more affordable.
To determine the impact high costs are having on housing choices, Freddie Mac surveyed 2,000 American adults throughout June. The company found that Americans are having trouble affording either option."Our survey shows that the national housing affordability crisis is worsening," Palmer said.
According to Freddie Mac, nearly 60% of its rental respondents say their rents grew over the past 12 months — with nearly 1 in 3 seeing rent increases of 10% or more.
Although 38% of survey respondents reported a wage increase over the last year, a third say their new raise won't cover their increased rent. Furthermore, nearly 1 in 5 of respondents who have experienced a rent increase say they are "extremely likely to miss a payment."
Even with rents soaring, Freddie's data shows that more have considered putting their homeownership dreams on pause as buying also remains outside their reach.
The company's survey shows that nearly three-quarters of renter households who have changed their home buying plans this year say they have become less interested in homeownership over the past 12 months.
Among those less likely to purchase a home, 44% blame their decision on high home prices, while 32% attribute it to increased interest rates and another 29% say it has to do with difficulty in coming up with a down payment.
"The surge in rents that took place over the last 12 months has created even greater housing uncertainty for the most vulnerable renters," Palmer said, adding that it's going to take a "concerted, sustained and comprehensive effort to turn the tide."