For many, the biggest barrier to homeownership is saving for that hefty downpayment. Rising rents exacerbate this situation. The pace of rental rate growth is higher this spring than last in about three-fourths of the major metros Zillow observes in its Zillow Real Estate Market Report.
Rent growth accelerated in 27 of the 35 metros observed for the May report.
At the national level, rents grew 2.1 percent over the year, reaching $1,440 per month.
The steepest rent price accelerations over the year were recorded in Pittsburgh, Detroit, and Houston. In Pittsburgh, rents declined 5.20 percent over the year leading to May 2017 and then grew 1.9 percent from May 2017 to May 2018.
Some slight relief came to some of the nation’s most expensive rental markets, the report revealed. While rents here are still generally on the rise, the pace is slowing, according to Zillow. However, this comes as little relief for those aspiring homeowners trying to save for a down payment.
“Even in markets where rent growth is slowing, high prices have already been established,” Zillow stated. “With mortgage rates rising and mortgage affordability deteriorating, owning a home may start to feel out of reach for many Americans.”
In Seattle, rental rate appreciation decelerated from 5.8 percent over the year last spring to 3.3 percent this May.
In Los Angeles, rental price growth slowed from a pace of 4.2 percent to 3.5 percent. In Portland, rents slowed from 3.6 percent growth to 1.5 percent, and in Boston, rental price growth slowed from 3.2 percent to 1.2 percent.
The good news, at least at the national level is the 2.1 percent national rent price growth recorded over the year in May is “well within a long-term sustainable range,” said Aaron Terrazas, Senior Economist at Zillow.
Terrazas also mentioned that the markets that experienced the greatest deceleration in rent price growth were those that “moved most quickly to add units.”
Another factor making saving for a down payment harder is continued home price growth across the nation. Home prices are up 8 percent over the year in May, reaching $216,000, according to Zillow.
The greatest home price appreciation among the nation’s 35 largest metros took place in San Jose, California, where prices increased nearly 26 percent over the year. Las Vegas and Seattle also experienced steep inclines at 15.5 percent and 12 percent, respectively.
Inventory, which can, of course, impact price growth, is on the decline. Zillow estimated that there are 5.3 percent fewer homes for sale this May than last May. Inventories dropped most drastically in Denver (-15 percent), Atlanta (-15 percent), and Pittsburgh (-13 percent).
Zillow noted that mortgage rates ended lower in May than where they started—arriving at 4.29 percent, after starting off the month at 4.38 percent and peaking mid-month at 4.51 percent.