According to an article in Fortune magazine, the Deutsche Bank issued a report listing the top ten cities with the most affordable homes. The findings are based on the cost of owning versus renting. With pricing stabilizing in most markets, affordability is back --- will the first time homebuyers return?
Atlanta Rent as % of after tax mortgage payment: 151%
Median home price change 2006-2010 -33%
Orlando Rent as % of after tax mortgage payment: 137%
Median home price change 2006-2010 -51%
Rochester Rent as % of after tax mortgage payment: 136%
Median home price change 2006-2010 -4%
Cleveland Rent as % of after tax mortgage payment: 133%
Median home price change 2006-2010 -15%
Tampa Rent as % of after tax mortgage payment: 132%
Median home price change 2006-2010 -41%
Las Vegas Rent as % of after tax mortgage payment: 125%
Median home price change 2006-2010 -56%
Jacksonville Rent as % of after tax mortgage payment: 123%
Median home price change 2006-2010 -26%
St. Louis Rent as % of after tax mortgage payment: 123%
Median home price change 2006-2010 -12%
Buffalo Rent as % of after tax mortgage payment: 122%
Median home price change 2006-2010 -23%
Memphis Rent as % of after tax mortgage payment: 122%
Median home price change 2006-2010 -15%
As you may know, rents declined but have not only rebounded but will steadily climb. Also, future multifamily projects will be difficult to obtain entitlements and develop due to the lack of financing, scarcity of multifamily zoned land, and local government reluctance to approve high density projects. Thus the lack of supply and increased demand will drive rents even higher.
The following graph illustrates the “bubble” in rental apartment. The homebuyers that should not have gotten a mortgage during the housing bubble are returning to the rental market and vacancy rates are decreasing. It is very difficult to find an affordable rental apartment.
Tuesday, May 3, 2011
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