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The “Cost Burden” of Renters vs. Homeowners

Homebuyers may have fared better following the latest housing boom than renters, according to a report from CoreLogic. Data from CoreLogic’s Single Family Rental Index indicates that renters are more cost-burdened than homeowners, and that the monthly cost to rent a single-family home has increased significantly, while the typical mortgage payment and costs associated is lower.

Additionally, the national rent index from CoreLogic is up 36% in December 2018 compared with December 2005, but the typical mortgage payment was down 4% over that period. Seven of the 12 large metro areas evaluated by CoreLogic indicated rent increases between 27% and 61% between December 2005 and December 2018, while also reporting drops in the typical mortgage payment ranging from about 3% to 24%t.

Overall, home loans are performing well. CoreLogic’s Loan Performance Insights Report has indicated that delinquecy has fallen 0.9% year over year. Employment increased by 196,000 in March, according to the most recent U.S. Bureau of Labor Statistics Employment Situation Summary, which Frank Nothaft, CoreLogic Chief Economist cites as one reason for the increased loan performance.

"Income growth, home appreciation and sound underwriting combined have pushed delinquency rates to their lowest level in 20 years,” said Frank Nothaft, CoreLogic Chief Economist. “The low delinquency rates on home mortgages are a contrast to the rising delinquency rates on consumer credit. While home mortgage delinquency rates are at, or are near, their lowest levels in two decades, delinquency rates for auto and student loans are higher now than they were during the early and mid-2000s."

According to CoreLogic, homeowners are just less cost burdened. As of 2017, 27% of mortgaged homeowners were “cost burdened,” meaning 30%t or more of their income went toward the monthly mortgage payment and other owner expenses, down about 10 percentage points from 2007. Meanwhile, 46 percent of renters are cost burdened as of 2007, up from 45.6% in 2007.

Census Bureau data also suggests a drop, with the cost-burdened, owner-occupied homes falling 32% between 2007 and 2017, while cost-burdened renters increased by around 19%.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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