These Renters Were Hit Hardest by the Financial Crisis
The financial crisis turned a lot of Americans into renters, because they couldn’t keep paying their mortgage, or because high unemployment and stagnant wages in the ensuing years forced them to put off home ownership. A new report from real estate website Trulia seeks to identify the groups that lost the most purchase on the dream of home ownership during the recession.
The answer, by one measure: affluent Hispanic millennial men. In 2006, 32 percent of those households were renters. By 2014, the share had nearly doubled to 63 percent.
The above table can be read through a handful of intersecting trends. Millennials have been slower to buy their first homes than members of previous generations. The wealth gap widened along racial lines following the recession, partly because white workers' incomes recovered more quickly, and partly because white households were more likely to own such financial assets as stocks. More affluent households were more likely to own homes in 2006, meaning their home ownership rate had further to fall.
By another measure—the share of income spent on housing—poor renters were hardest hit by the recession. Among renters, the bottom 25 percent of wage earners spent 63 percent of income on housing in 2014, up from 56 percent in 2006, the Trulia study found.
Rents increased 22 percent over the course of the study, and the average household spent a larger percent of its income on rent in 41 out of 50 metro areas the report looked at. Geography also played a role: Las Vegas, Phoenix, and Ft. Lauderdale, all hotbeds for foreclosures, were the metropolitan areas with the largest increases in the percentage of households that rent.
How will those new renters fare in the housing market in the future? On the bright side, rent increases appear to be slowing. Low down-payment loans backed by the Federal Housing Administration, mostly used by first-time buyers, are the fastest-growing segment of the mortgage market. The higher-earning households that became renters during the period studied have a good chance of returning to ownership, said Ralph McLaughlin, Trulia's chief economist.
Poorer renters are less likely to return to home ownership. The bright side is that stricter lending standards are probably keeping homebuyers from borrowing money they can't afford to repay. On the other hand, rising rents are landing heaviest on the poor.
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