Atlanta is the market where renters across the country stand the greatest chance of becoming homeowners next year, according to an analysis by one of the largest U.S. real estate organizations that weighed variables including housing supply, affordability and population growth.
In a report that may have implications for where investors buy and build apartments, the National Association of Realtors’ “On the Horizon: Markets to Watch in 2023 and Beyond” listed the top 10 metropolitan areas, based partly on whether the regions exceed national averages such as job growth and the number of renters who can afford a median-priced home.
Apartment owners have benefited from renters not being able to buy houses over the past two years as prices and mortgage rates skyrocketed. Several cities on NAR’s list have been some of the best-performing U.S. apartment markets.
Rising mortgage rates and rents created a “double whammy” scenario for potential homebuyers, according to the report. It noted that nearly half of all renters spend more than 30% of their income on rent, making it more difficult to save for a down payment.
Spending more than 30% of your income on rent is considered cost-burdened under federal government definitions.
“The typical family can no longer afford to buy the median-priced home,” NAR said in the report. “Buyers need to earn more than $100,000 if they want to purchase the median-priced home without going beyond their budget.”
For the residential rental industry, that means a steady flow of renters staying in place. Average rent across the country is expected to increase 5% next year, compared to 7% this year, according to Lawrence Yun, NAR’s chief economist.
Raleigh, North Carolina, was second after Atlanta on NAR’s list of top markets to watch next year, followed by the Dallas-Fort Worth region in Texas; Fayetteville, Arkansas; Greenville, South Carolina; Charleston, South Carolina; Huntsville, Alabama; Jacksonville, Florida; San Antonio, Texas; and Knoxville, Tennessee. Huntsville is considered the most affordable among the top 10, according to the association’s report.
Huntsville has seen a spate of apartment construction in the shadow of the Army’s Redstone Arsenal and supporting defense contractors, the NASA Marshall Space Flight Center and a new auto plant being built through a joint venture between Japanese companies Toyota and Mazda.
Texas, with no state income tax, has been a popular destination for residents and companies, and San Antonio is more affordable than other areas in the state such as Austin, which is 80 miles northeast of San Antonio. The qualifying income for a median-price home in San Antonio is about $85,000 compared to $130,000 in Austin, according to NAR. Nonprofit real estate data and policy organization Urban Land Institute’s annual “Emerging Trends in Real Estate” report listed San Antonio as the top homebuilding prospect for next year.
Atlanta, Raleigh and Dallas-Fort Worth experienced tremendous rent growth this year. Higher rents brought a big boom for the U.S. residential rental business for much of the past two years with public apartment real estate investments trusts reporting strong earnings during that time as a result.
For example, MAA, the second-largest apartment owner in the country, reported Tuesday that shareholders will receive a dividend of $1.40 per share for the fourth quarter, a 12% increase from the third quarter to mark its biggest quarterly increase in at least 20 years.
Renters have dealt with inflation outpacing wage growth. NAR noted that while wages grew 5% within the past year, inflation was at 8%, though inflation appears to be slowing. The annual inflation rate decreased to 7.1% in November from 7.7% in October, the Labor Department reported this week.
If inflation continues to slow, mortgage rates could stabilize below 6%, bringing more homebuyers back to the market, according to NAR.
NAR noted, however, that housing inventory is expected to remain tight in 2023.
#Top #Markets #Watch #Renters #BecomingHomebuyers