Net Worth Falling + 20% Down Payment = 1 Million Renters Added in 2011 #Multifamily

In yesterday’s MFE article What Does the Fed News Mean to Apartment Owners?: “the median net worth of middle class families plunged by 39 percent in just three years.

The Fed used a hypothetical family with $126,400 in 2007 to prove that point. In 2010, that same family’s net worth dropped to $77,300. Median family income also fell—from $49,600 in 2007 to $45,800 in 2010. The number comes from the Fed’s Survey of Consumer Finances, due out this coming Monday.”

Then in a WSJ article Why Housing Affordability Is a Mirage: “Home prices and mortgage rates have made monthly mortgage payments lower than at any time in the past decade. But housing isn’t any more affordable than it was five years ago… the total cost of homeownership, as a share of a borrower’s income, is the same today as it was during the height of the housing mania… The reason: borrowers have to put more money down to get a loan… That means while the absolute monthly payments are lower, the all-in costs of homeownership haven’t become more favorable… tighter down-payment standards since 2006 have raised borrower costs by 22%.”

And now back to MFE for the result One Million Renters Added in 2011, Married and Higher Income Renter Populations Grow: “One million. That’s the number of new rental households the U.S. added in 2011, according to “The State of the Nation’s Housing 2012″ report, released today from the Joint Center for Housing Studies (JCHS) at Harvard University. That’s the largest reported increase of renter households since the early 1980s.”

Not just young singles either: “Another trend that apartment designers and architects may want to be aware of is the rising growth of married couple as renters. Although they only accounted for 36 percent of renters in 2011, they represent 50 percent growth in renter households over the past five years.

Upper and middle income households are also more likely to rent. In the early 2000s, the increase in renter households occurred in the group making less than $30,000 per year. After 2006, that group accounted for just under half the growth in rental households. Households earnings more than $75,000 accounted for a fifth of the increase in rental households after 2006.”

The punch line for apartment building investors is that with their parents poorer, Gen Y can’t look to them for help with that 20% downpayment and will be staying in rental mode for much longer.

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