DS News - U.S. Bank

34 CONCERNS OVER RENT AFFORDABILITY AREN'T GOING ANYWHERE Annual growth in median rents nationwide have slowed from last summer's extreme pace. But according to the Zillow Rent Forecast, just because rental growth is slowing down, doesn't mean it's not still expected to grow in some of the nation's hottest markets, contributing to continued affordability concerns. e Zillow Rent Forecast reveals that markets in which technology jobs are especially prevalent, such as Seattle, Denver and the San Francisco Bay Area, will continue over the next year to be on the forefront of rental growth. e report forecasts U.S. rents to grow by 1.7 percent through August 2017, to a Zillow Rent Index of $1,429 per month. Zillow notes that among the 35 largest metro markets, rents are expected to grow the fastest over the next year in Seattle by 7.2 percent, Portland by 6 percent, Denver by 5.9 percent, Cincinnati by 5.2 percent, and San Francisco by 4.9 percent. is continues a recent trend seen in August where Seattle and Portland led all large markets in annual rental appreciation, according to the Zillow Real Estate Market Report. Based solely on monetary value, the report shows that the two Bay Area metro markets of San Jose and San Francisco, remain the most expensive large rental markets in the country, by a landslide. e amount renters in and around San Jose should currently spend is about $3,517 per month. For the San Francisco area, median rent runs roughly $3,406 per month. In looking at the next highest priced rental market though, Los Angeles came in at approximately $2,593 per month. Zillow forecasts that in the next year, these multi-county areas will still continue to be ranked among the nation's priciest and if rents rise as expected, by the end of next summer renters in San Francisco should expect to budget $3,573 per month. For those in San Jose, a median rent is expected to rise to $3,677 and for renters in Los Angeles the median price to rent is anticipated to be close to $2,718 per month. Continued rapid growth in rents will ensure that rental affordability concerns remain an important issue going into 2017. Despite this, Zillow notes that recent strong gains in income growth will help keep rental affordability and the share of income devoted to rent each month in check. THE RISING TIDE OF HOME EQUITY e aggregate amount of equity in U.S. residential homes has more than doubled since 2011, the result of 40 percent price appreciation nationwide during that time. Even with that much of an increase in home equity—which hit a trough of $6.1 trillion in June 2011 but by June 2016 had risen to $12.7 trillion—there is still plenty more equity to be regained while home price appreciation continues over the next year, according to CoreLogic's U.S. Economic Outlook for October 2016. "We project the national CoreLogic Home Price Index will rise another 5 percent in the coming year, helping to boost home-equity wealth by close to $1 trillion," CoreLogic Chief Economist Frank Nothaft said. "In turn, this wealth gain should add to consumption spending and contribute to economic growth in 2017." According to CoreLogic's most recent Home Equity Report released in mid-September, more than half-a-million (548,000) homeowners regained equity in the second quarter of 2016, bringing the total of residential homes with equity to approximately 47 million (93 percent). is left approximately 7 percent, or close to 3.6 million homeowners, in negative equity. "We see home prices rising another 5 percent in the coming year based on the latest projected national CoreLogic Home Price Index," said Anand Nallathambi, president and CEO of CoreLogic. "Assuming this growth is uniform across the U.S., that should release an additional 700,000 homeowners from the scourge of negative equity." With the substantial rise in home equity, which is a key component of household wealth, there has been a corresponding increase in consumption spending and renovation expenditures. Moody's Analytics reported that consumption spending rises by approximately $2 for every $100 worth of housing wealth that is regained. "[A] $6 trillion rise in housing wealth has lifted consumer spending by more than $100 billion during the last five years," Nothaft said. "And renovation expenditures are up as well, further contributing to economic growth." According to CoreLogic, the average gain in home equity, or household wealth, from the middle of 2015 to the middle of 2016 was $11,000 per homeowner. e largest increases were seen in California, Oregon, and Washington, all of which had an average increase in equity of almost $30,000 per homeowner. In Connecticut, New Jersey, North Dakota, and Pennsylvania, there was either a decline or no change in the average amount of equity gained per homeowner.

• Cover