Average rents in big cities rose more than 5% in the 12-month period ending in June 2013, while wages rose a measly 1%
Rent prices are going up in cities across the country even as wages stagnate, making it ever harder to afford to live in big cities.
In the 25 largest rental markets in the country, rents rose faster than wages, according to the latest data published by the real estate website Trulia.
Miami, New York, Dallas and Phoenix and 21 other big cities saw average rent increases of 5.5% in June compared with the same month last year. Meanwhile, annual average wages increased nationwide just 1.0% in 2013 compared with 2012, according to the Bureau of Labor Statistics.
The two data sets reflect slightly different time periods, but the trend is clear, said Jed Kolko, chief economist at Trulia: affordability is worsening.
“Wage data is up one percent,” said Kolko. “Rent is rising at a pace much faster than that.”
San Francisco had the highest median rent for 2-bedroom apartments, at $3,550, according to Trulia, while Miami residents paid the highest percentage of their wages on rent for an average 2-bedroom, or 62% of wages. New Yorkers paid 56% of their wages on rent, while on the other and of the spectrum, St. Louis residents forked out just 24%.
Rents are soaring in smaller cities like Denver (10.8% increase) and Atlanta (8.6% increase) as well.
San Francisco saw the highest increase in rents in June compared with last year at 13.8%.
Households headed by 70-year-olds will surge 42% by 2025. Who will drive them to the store?
The graying of the American homeowner is upon us. The question is: Will communities be ready for the challenges that come with that?
The number of households headed by someone age 70 or older will surge by 42% from 2015 to 2025, according to a report on the state of housing released last month by the Joint Center for Housing Studies of Harvard University, or JCHS.
The Harvard researchers note that a majority of those households will be aging in place, not downsizing or moving to retirement communities. That will have implications for an array of support services people will need as they age.
But the housing age wave comes at a time when federal programs that provide those supports are treading water in Washington. Consider the signature federal legislation that helps fund community planning and service programs for independent aging, the Older Americans Act. The OAA supports everything from home-delivered meals to transportation and caregiver support programs—and importantly, helps communities plan for future needs as their populations get older.
States and municipalities use the federal dollars they receive via the OAA to leverage local funding. The law requires reauthorization every five years, a step that has been on hold in Congress since 2011. Funding has continued during that time, with one exception: During sequestration in March 2013, OAA programs were cut by 5%; many have since been reversed, but other cuts now appear to be permanent.
A survey last year by the National Association of Area Agencies on Aging (NAAAA), which represents local government aging service providers, found that some states had reduced nutrition programs, transportation services and caregiver support programs.
Recovery since then has been uneven, according to Sandy Markwood, chief executive officer of the NAAAA. “In some cases, states made up the differences, but many programs still are not back to pre-sequestration levels.”
But here’s the more critical point: Even if all the cuts had been restored, treading water wouldn’t be good enough in light of the challenges communities will soon face.
“From a planning perspective, putting in place things like infrastructure and transportation services takes time,” Markwood says. “We don’t have the luxury of time here.”
Indeed, aging of communities is shaping up as a signature trend as the housing industry continues its slow recovery after the crash of 2008-2009.
Young people typically drive household formation, but the Harvard study notes that millennials haven’t shown up in big numbers because of the economic headwinds they face. Real median incomes fell 8% from 2007 to 2012 among 35- to 44-year-olds, JCHS notes, and the share of 25- to 34-year-old households carrying student loan debt soared from 26% to 39%. Meanwhile, home prices have been jumping, and qualifying for mortgage loans remains difficult.
Millennials eventually will account for a bigger share of households as more marry and start having families, according to the study. But for now, boomers are the story.
The oldest boomers start turning 70 after 2015, and the number of these households will jump by 8.3 million from 2014 to 2025. Most will be staying right where they are. Mobility rates (the share of people who move each year) typically fall with age: Less than 4% of people over age 65 moved in 2013, compared with 21% of 18- to 34-year-olds and 12% for those 35 to 45.
Mobility has been on a downward trend since the 1990s, and the housing crisis accelerated the trend, according to Daniel McCue, research manager at JCHS.
Aging in place could create problems in suburbs, which are designed around driving, McCue says. “People are going to need a more distributed network of services for transportation, healthcare and shopping in the suburbs. They’ll need some way to get to services or for the services to get to them.”
There is one possible silver lining in this story: The needs of aging-in-place seniors could spur better community planning. If so, the elderly won’t be the only group that benefits.
“When you do things to make roads safer or increase public transportation, or add volunteer driver programs, that’s good for everyone in the community,” Markwood says. “It’s not a zero-sum game.”
Related story: Why Most Seniors Can’t Afford to Pay More for Medicare
Related story: The State of Senior Health Depends on Your State
Brown patches and weeds getting you down this summer? To keep your turf lush and thick, try some of these cost-effective tactics.
Does it feel like the grass really is greener in other people’s yards? Summer’s heat and low rainfall are tough on turf, so neighbors sporting lush lawns this time of year probably have better species of grass, higher-quality topsoil, and automatic irrigation. You, too, can have all that—for perhaps $10,000 or more—with a complete lawn replacement. Or you can try more affordable approaches to keeping your existing grass verdant.
“Taller grass holds more moisture and stays greener than short grass,” says Mark Schmidt, principal scientist at John Deere. “Plus, it shades the soil, helping to keep the roots wet.” Set your mower deck to three inches (or as high as it will go). Also, inspect the grass right after mowing. Jagged tears indicate that the blade is dull, and these wounds sap moisture from the plants. Get a replacement blade for $10 to $40 or take your mower for a tune-up ($75 to $200), which includes blade sharpening.
Do not feed the plants
When a lawn turns brown, it’s not dead—it’s just gone dormant to save energy for cooler, wetter times. You may be tempted to apply fertilizer and weed control, but if not done right, those chemicals can burn a heat-stressed lawn, says Oregon State University horticulture professor Alec Kowalewski.
Water on schedule
Dragging around the hose and sprinklers to hydrate parched grass may do more harm than good. “Coming in and out of dormancy can kill the lawn,” says John Stier, a playing-field consultant to several National Football League teams. “So don’t water unless you’re going to be superconsistent about watering all season long.” That’s probably not realistic with manual efforts, so either let nature take its course or go for automatic irrigation, a $2,000 to $4,000 expense for which there really isn’t a good low-cost workaround. To maximize your investment, ask the installer to arrange sprinkler heads into zones based on the quirks of your property so that shady, sunny, poorly drained, and sloped areas can get programmed for their own watering needs. Opt for a rain sensor too (around $150), which will override sprinklers when Mother Nature provides irrigation for free.
Aerate in autumn
Whether or not you irrigate, think of lawn restoration as a multiseason project. In the fall, plan to aerate—cutting hundreds of holes to loosen the soil—and top with compost and a mix of grass seed bred for your climate ($500 to $1,000 to hire out the job). Repeat for several seasons, and you’ll gradually improve the soil and grass type, making your lawn more drought-resistant, and yours the greener side of the fence.
There are many ways to build lasting wealth. MONEY wants to hear how you're doing it.
The number of millionaires in America hit 9.6 million this year, a record high and yet another sign that the wealthy are recovering from the Great Recession, thanks in large part to stock market and real estate gains.
Are you on target to join their ranks? Are you taking steps—through your savings, your career decisions, your investments, or your rental properties—to make sure that by the time you retire your net worth will be in the seven figures? MONEY wants to hear your story.
There are many paths to that kind of wealth, and they don’t necessarily involve a sudden windfall, a big head start, or a six-figure salary. You can build up a million or more in assets through steady saving, a sensible approach to investing, modest real estate holdings, or a winning small business idea. Are you finding ways to boost your savings at certain point of your life, like when the kids are out of school or the mortgage is paid up? Are you planning to take more or fewer risks with your investments as you near retirement? And if you invest in real estate, do you find that owning even one or two rental properties is enough to achieve prosperity?
Got a story like this to share? Use the confidential form below to tell us a bit about what you’re doing right, plus let us know where you’re from, what you do for a living, and how old you are. We won’t use your story unless we speak with you first.
How I learned delayed gratification means opening the door to your true goals, like a home or a comfortable retirement.
I was raised around a lot of money—not my own, but other people’s. Granted, by any reasonable national standard my family was well-off, but growing up in New York City meant that my playmates were the children of media moguls and Wall Street titans, so my comparison group skewed upwards several tax brackets. For a while this environment created both a sense of longing and, unfortunately, entitlement. Everyone else has a summer home, why can’t we?! That feeling of financial inadequacy turned out to be a blessing in disguise however, because it taught me what those moguls and titans probably already knew, which is that the most satisfying wealth is the kind that you create for yourself, dollar by dollar by dollar.
Financial independence is certainly easier to achieve with a good income. But you can also get there, or at least come close to it, by saving and investing no matter what your salary is. (See The Millionaire Next Door.) And so at the most fundamental level, independence requires that you always live well within your means. If you are not living within your means, then you are not saving, and if you are not saving, then you are not creating wealth, you are creating the opposite: need. Financial independence means not having need.
There is no saving without delaying gratification, saying no when you want to say yes—not just every once in a while but pretty much constantly. Saying no not just to the big trips or a car, but also to the expensive haircuts and the overpriced appetizers and the ballet flats with the big logo on them when a pair from DSW will do just fine. It means being chronically cheap and enjoying it. Because every no is a yes to getting things that you really, really, really want and can truly fulfill need, no matter what stage of life you are in.
In my 20s and early 30s, my biggest need, after I had established myself on a career track, was to have a place of my own. I had bounced from illegal sublets to 4th floor walk-ups and had literally begun dreaming of “discovering” an extra room in whichever cramped apartment I was occupying, a dream that I later found out was shared in the collective unconscious of similarly space-starved young Manhattanites.
At the outset, buying my own one bedroom seemed an impossibility. But after a job switch and salary raise, I began automatically withdrawing money from my checking account into a house fund. After several years, I had saved $60,000, at which point several of my relatives generously gave me gifts to increase my down payment and create enough of a cushion to meet co-op board approval. Buying that apartment at age 32 was my first major milepost on the road to financial independence, but I didn’t do it alone.
They helped me, I believe, because I had shown them that I understood what building wealth entailed: being a good steward of your own money, understanding that you have to teach yourself the things you don’t know, whether that’s fixed-rate versus adjustable mortgages or the value of compound interest, and yes, delaying gratification. Granted, timing was on my side—I bought the apartment in the early stages of the real estate boom as was able to later profit not only on its sale but the sale of a subsequent, larger apartment.
But having saved for a purpose once, I know that I can do it again in the future, although not whenever I want but whenever I am able. I would love to be putting aside money to install a master bathroom in my house, but right now it’s more important that my children, with whom I currently share a bathroom, have good childcare, and that I increase my funding to my retirement accounts. The master bath will have to wait.
So here’s where I’m going to get really preachy, because there’s actually another important lesson that all this delayed gratification has taught me. There will always be more and more things to save for: sleep-away camps, college funds, maybe even someday a summer cottage. Today, as I write this on a beautiful day at the end of June, I can honestly say that the path to financial independence also means being profoundly grateful for what you already have.
Turns out the rent really is too damn high
If you dread writing your first-of-the-month check, you’re not alone.
Apartment rents are continuing to rise rapidly across the country as landlords pushed through big hikes over the past year, even as household income remain squeezed.
The average monthly rent for an apartment rose to $1,099 in the second quarter of 2014, up 3.4% over the 12-month period ended in June, according to data from the real-estate research firm Reis. The second quarter was the 18th consecutive quarter of rent increases.
The ever-spiraling rental prices are because tight mortgage-lending standards keep younger people in the rental market longer, particularly in urban areas. With vacancies at just 4.1%, rental supply is tight — and as a result, average rents have increased 14% since the end of 2009.
In San Francisco, San Jose, Calif. and Seattle, rent growth exceeded 6% in the past year, and even cities like Charleston, S.C. and Nashville, Tenn.—cities not associated with high rents—saw growth of about 5% over the same period.
New York City was the most expensive rent market with an average rent of $3,152/month, with San Francisco the second most expensive.
Meanwhile household income stagnated in 2012 at $50,017, well below 2007′s peak of $55,627, adjusting for inflation, the Wall Street Journal reports, making it harder for renters to afford their apartments.
Maybe it really is time to vote for the Rent Is Too Damn High Party, the mostly New York-based political party that’s as frustrated with landlords as you are.
From Russia, Canada, the Middle East and elsewhere, international buyers are moving in.
If your child is one of the 14% of millennials who have moved back in with their parents, here are some tips to nudge him (or her) out the door.
For most of us, leaving the nest was a rite of passage. We went to college, and then proudly headed out into the world to make our own way, while our parents turned our old room into another guest bedroom.
However, for a significant percentage of young adults, that rite of passage is now all about returning to the roost rather than flying solo. According to Gallup research, 14% of millennials (24-to-34-year-olds) have moved back in with their parents. The homeownership rate for those under age 35 was 36.2% in the first quarter of 2014, down from a historical high of 43.1% at the end of 2005, according to Census data. According to numerous economic reports on millennials, this is attributed to a weak job market, high cost of living, significant college debt, and other factors.
These kids, as well as any adult children who have decided to move back in with mom and pop are lovingly referred to as “boomerang kids.” Clearly the analogy is obvious.
For Mom and Dad, who would love to have the ‘kids across the hall’ become the ‘kids across town,’ here are seven pointers you might want to consider:
Start Charging Rent
Cut off the free ride. Yes, it sounds harsh, but you may be doing both you and your kid a favor. Managing money and a monthly budget is something that is not learned in school, and it is certainly not learned hanging out in your parent’s converted attic for free. Give your boomerang kids a real estate reality check. If the free ride comes to a screeching halt and they are paying rent, they will probably want to do it in their own apartment, closer to (or with) their friends, near downtown or a closer drive to their office. Charge rent and enforce it. Once they start getting that first-of-the-month monetary wake up call, it might shock their system enough to have them consider alternative arrangements. If they’re going to have a landlord no matter what, they’re likely to consider a new, more independent situation.
Collect Monthly Payments
Here’s another way to give them a foot out the door – but still a leg up. Start charging them monthly payments now. Let them know that they will have to come up with the monthly equivalent to local rents each month for the next six months. At the end of the six months, you will give them back all the money when they move out. That does three things: You teach them budgeting skills, you incentivize them to move, and you give them a financial helping hand on move-out day.
Be A Strict Landlord
No parties, no loud music, no guests after 10:00 pm. Keep the house rules strict. At some point, your kid is going to want to have a little independence, and some fun too. Living with a strict landlord may just be the incentive he or she needs to find a place of their own.
Set A Deadline…and Stick To It
If you can sense that your boomerang kid is riding out his or her free meal ticket under your roof as long as they can, help them visualize when that ride will end. Create a deadline for them to move out and stick to it, no matter what. It’s likely you never intended to have kids under your roof for more than two decades, so your children need to respect that…and they need to get on with their own lives. Even in a world where millennials are underemployed compared to their Gen X, Y and Baby Boomer counterparts, there are still plenty of ways for them to make a living that enables them to live with a roommate or two or three…elsewhere.
Help Them Get Organized and Overcome The Mental Hurdle
After all the financial aspects are considered, one of the biggest hurdles to making a big move is mental: it just feels overwhelming. So many things to do, buy and organize before it can actually happen. Your child may just need the expertise of someone who’s moved multiple times in their lives to talk them down off the “I’m too overwhelmed and can’t do this” ledge. Map out all the necessities and then make a list of the “nice to haves down the road” so they can see what’s an immediate need, and what can be done over the coming weeks and months.
Gift or Loan Them The Down Payment
Trulia’s latest survey showed that 50% of millennials surveyed plan go to their parents for help with the hefty down payment that’s required to purchase a home in today’s housing market. If you want your adult child up and out of your basement, consider giving them the financial head start now they need to form their own household and be independent.
Buy A Multi-Unit Investment Property
I am a huge proponent of purchasing multiunit properties, such as a duplex or triplex, because they are great investments. In the case of your “failure to launch” millennial, slot them into one of the units of your new property and rent out the others. The rental income is likely to cover much of the costs of ownership, and you’ll have a built-in property manager in the building to keep an eye on things. Plus, your boomerang kid is learning valuable management skills at the same time. It can be an investment property for you, and solve the “son or daughter is still in my basement” problem, all at the same time.
More on Financial Independence
Q: Should I use savings to pay off car loans or make a down payment? — Carmella F., Pittsburgh
A: The first line of business is to make sure you have enough savings for an emergency fund, a minimum of four months if both spouses are working, six months if one isn’t, says Pittsburgh financial planner Diane Pearson.
Paying off the $30,000 in two car loans you told us you have would deplete your savings. Not only does that leave you vulnerable to unforeseen expenses, plowing money into assets that only lose value as they age doesn’t make sense, says Pearson. When applying for a mortgage, banks would prefer to see $30,000 in savings plus car loans over no savings and vehicles owned free and clear.