Home prices have risen sharply in the last two years. At the same time, rent prices have soared. People who cannot afford down payments often rent instead. Others do not want to be tied to home for years, so renting makes it easier for them to relocate
Home prices have risen sharply for two specific reasons. The first is that mortgage rates dropped to 3% for a 30-year fixed loan last year. (Those days are over. Mortgage rates are now close to 6%).
Another reason for home price movement is America’s newfound mobility. People have been able to move because millions now work from home. The COVID-19 pandemic shuttered most business locations. Americans have been able to go from where they have to live for work to where they want to live for lifestyle reasons.
Some large portion of the American migration has been driven by the cost of living. The country’s largest coastal cities like New York and San Francisco have home prices more than double the national average. Many people have left these cities. Medium-sized cities inland have “reasonable” home prices and are often not nearly as crowded.
Since rent is based on supply and demand, rentals in places like New York and California are the most expensive in the country as is the case with home prices. The lowest-priced cities are primarily the old industrial metros like Detroit, Cleveland, and Rochester.
Rental data is also available by state as are calculations of factors like affordability. Consumer Affairs recently released a report titled, “Best States For Renters” The data were pulled from 10 sources which were used to create 12 “metrics”. Sources included Numbeo, Redfin, the Census, and FEMA. Metrics included housing vacancies, eviction rates, and home price to rent ratio.
The worst state to rent was Connecticut which has among the highest household incomes of any state. One a scale of 1 to 100, with 1 being the worst score. Connecticut had a score of 32. It was followed by Missouri and Illinois at 33, a sign that a state’s location is not a major factor in states with the worst rent scores. Georgia was next with a score of 34.
The best state for renters was South Dakota with a score of 74. The best states for renters were clustered in one area. Wyoming and Montana had scores of 71. North Dakota had a score of 67, which put it in the top five.
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