WASHINGTON (AP) — U.S. home rental prices continued to climb at a modest pace in December, but rapidly escalating costs in cities such as San Francisco and Denver suggest that apartment dwellers are facing more financial pressure.
Prices rose 3.3 percent in December compared with 12 months earlier, real estate data firm Zillow said Friday. Although that increase is less than the recent appreciation in home values, a surge in apartment costs in several of the hottest markets indicates that renters who aspire to buy homes face mounting financial challenges.
The share of Americans who own their homes has slipped to 64.4 percent from a peak of 69.2 percent in 2004, the result of the housing market crash that triggered the Great Recession in late 2007 from which the U.S. economy is still recovering more than seven years later. Because fewer Americans can afford to buy a home, demand for apartments and rental houses has pushed up prices at a time when newly graduated millennials are starting to leave their parents’ homes.
“We do not have the affordable rental housing resources to meet” the demand, said Barry Zigas, director of housing policy at the Consumer Federation of America, at an industry conference this week.
Rental prices have risen 52 percent since 2000, while incomes for renters have only increased 25 percent, said Stan Humphries, chief economist at Zillow. The higher costs make it difficult for renters to save for a down payment, which then causes them to rent for a longer period of time and delay any potential home purchases.
“You don’t have to be a housing economist to see that there is a problem there,” Humphries said.
Additional construction has yet to significantly limit price growth nationwide. Builders broke ground on 376,000 apartment complexes last year, a 10.2 percent increase from 2013, the Commerce Department reported Wednesday. By contrast, single-family house construction rose just 1.4 percent last year.
Rents jumped 15.4 percent in the San Francisco area to a median monthly cost of $3,031, an increased mirrored by San Jose where prices were up 14.5 percent to $3,187 a month. Rents climbed 10.5 percent in Denver to $1,817 a month. Kansas City also notched a substantial 8.5 percent gain to $1,204 a month.
Still, tenants are catching a break elsewhere. In Chicago, Minneapolis, Philadelphia, Baltimore and Washington, DC, rents rose by less than 2.2 percent. Rents in Minnesota’s Twin Cities area ticked up a mere 0.1 percent this past year to $1,501.