Housing costs represent a significant housing expenditure for Americans, and the effects of the recession make these expenses more financially burdensome for many Americans. Massive layoffs and long-term unemployment forced some consumers to rely on credit cards as a means of meeting their day-to-day costs, which has resulted in massive credit card debt and credit score damage. In addition, the housing crisis prompted lenders to tighten their credit score criteria, leaving only a select number of Americans eligible to obtain new mortgages or refinance their existing terms.
These scenarios have made homeownership difficult for a large number of households, and in response to their inability to qualify for a mortgage, most have turned to the rental market. However, new data shows that the housing crisis has taken its toll on this market as well and consumers will now bear the costs. As demand for apartments, condos and rental properties grew, supply began to dry up, and many landlords are now raising their rental rates.
U.S. rental rates increased 5.4 percent over the 12 months ending June 30, according to real estate website Trulia. Large metropolitan areas saw the largest increases in rent prices, with San Francisco experiencing 14.7 percent increase in rates from one year ago. Rent prices in Denver, Colorado, rose 10.9 percent, while Boston residents also faced double-digit rent increases of 10.3 percent.
Rental prices may stabilize if more Americans turn back toward homeownership. However, battered credit scores and job insecurity may steer individuals toward rental units for the next several years.
Although prices are climbing – and are expected to continue their ascent until the housing crisis has waned – there are several ways renters can find affordable apartments. Similar to purchasing a home, renters should develop a money management plan to find out what they can afford. Keep in mind that housing costs should never exceed 28 percent of an individual’s take-home pay. While they may be in a position to pay their bills in full and on-time, paying too much in housing costs can divert money away from financial goals, such as building savings and contributing to retirement.
In addition, consumers can save significantly by looking for apartments on the outskirts of metropolitan areas, rather than living downtown. Typically, the closer individuals live to a major city, the more they pay for housing. Lastly, consumers should consider finding a place that has utilities included in the rent. This may help reduce spikes in heating, electric or water bills as the seasons change.