In the United States, earning $ 100,000 a year is not always enough to buy a house – Economy

For Janessa White, the American dream of a red brick house on a tree-lined street near a good primary school is still achievable. She only has something to praise her.

Last year, Mrs. White and her companion moved from Missouri to Denver with their seven-year-old son. In Missouri, Mrs. White owned her house, which she had purchased for just over $ 100,000. Buying a house like the one she rents in Stapleton, a wealthy neighborhood in Colorado's capital city, would cost her about four times as much. Although her household income slightly exceeds the six figures, accessing the property is difficult in Denver.

"It's hard not to buy," she says. Saving for a huge contribution seems almost impossible. "

Mrs. White's household is part of a growing group: Americans with high incomes who rent instead of buying their homes. In 2019, about 19% of US households with six-figure incomes rented their homes, compared to about 12% in 2006, according to an analysis by Tea Wall Street Journal dUS Bureau of Census inflation-adjusted income data. This increase equates to approximately 3.4 million new tenants who, a generation ago, would likely have been homeowners.

"I do not remember someone we rented recently who did not make $ 100,000," says Bruce McNeilage, owner of 148 rental units in the Southeast and building 118 more.

As more and more people give up homeownership, there is a risk that the wealth gaps that already exist in America are worsening. The appreciation of their homes has always been the means by which most middle-class Americans have built up a legacy. When real estate grew steadily in the decades following the Second World War, the middle class's wealth jumped, according to a new analysis of data from a survey of the general public by the University of Michigan at the late 1940s.

"Houses are democratic assets, about half of the real estate holdings are held by the middle class," says Moritz Schularick, professor of economics at the University of Bonn and co-author of the analysis.

It is not uncommon for people with high incomes to be tenants in expensive coastal cities like New York and San Francisco, where very high real estate prices have long limited homeownership. However, these markets account for less than 20% of new six-digit tenants, according to Wall Street Journal.

To accommodate affluent tenants, developers quickly erected upscale apartment residences around downtown areas. Investors, meanwhile, have bought hundreds of thousands of homes in the suburbs for rent and are building more and more single-family houses specifically for affluent tenants.

The average renter of the country's two largest individual homeowners, Invitation Homes and American Homes 4 Rent, now earns $ 100,000 a year, according to these companies. Between them, they have 133,000 homes in attractive neighborhoods with good schools around growing cities like Houston, Denver and Nashville, Tennessee.

In each of these cities, as well as in Seattle, Cincinnati and Ann Arbor – Michigan, the number of renters with six-figure revenues has at least doubled between 2006 and 2017, making it the category that knows the most. strong growth in this market, according to the study of Wall Street Journal.

During this period, which began just before the housing market implosion in 2007, the number of renter households in the United States increased by 25% while the number of homeowners remained almost stable, according to the US Bureau of Housing. census. Since 2017, home buyers have begun to return to the market, but not enough to offset a decade of influx of new tenants.

Large home rental companies are betting that high-income people will continue to rent. Funded by major real estate investors such as Blackstone, Starwood and Colony Capital, these companies ripped off foreclosed homes in hopes of leasing them to skilled workers who could afford to pay significant amounts each month but maybe not to buy.

"Very early on in this business, we realized that the cost of replacing a heating, ventilation and air-conditioning system is, in most cases, the same in a $ 1,200 or $ 1,300 rental as in one to one. $ 800 or $ 1,900, "says Dallas Tanner, managing director and founder of Invitation Homes.

Employees with six-figure incomes also tend to be more regular payers. A car problem or a sick child is not too expensive for them, as it can be for many low-income workers.

People with high incomes also tend to stay and are willing to accept regular rent increases if they do not have to change their schoolchildren. This translates into lower turnover and maintenance costs for the owners. "These tenants treat our homes as theirs," said David Singelyn, CEO of American Homes, at a conference on real estate investments this summer in New York.

Invitation and American Homes reported record growth in occupancy and rents, as well as a continued increase in home ownership, as average renter income increased to six digits.

The phenomenon is having an impact at the end of the chain in the sector and has triggered a rush among investors to buy and build family rental homes in growing cities. According to CoreLogic, investors – consisting of a mix of big and small owners as well as house pinball machines, who renovate before reselling – accounted for more than 11% of US home sales in 2018, the highest share never recorded.

According to the US Census Bureau, an income of $ 100,000 remains well above the median income of US households, which stood at $ 63,179 in 2018. But, nowadays, many Americans are stuck in debt . They pay for the car, credit card debt, health care bills and university loans to pay back. Student debt is particularly thorny for young Americans embarking on a family life.

There is a link between student loans and the housing crisis, which has not disappeared for young homebuyers. Many students took out loans because the housing crisis destroyed the equity in their parents' home, which could have helped pay for their university education. Since then, outstanding student debt has tripled to more than $ 1.6 trillion. A few years ago, Fannie Mae, the government-sponsored mortgage lender, had made loan eligibility easier for borrowers with a higher level of debt (although he recently tightened his lending conditions).

Despite these favorable conditions – and the low unemployment rate – the homeownership rate remains about one percentage point lower than its long-term average of 65 per cent, and well below its peak of 69 per cent reached during the last real estate bubble. In the second quarter, there were 78.5 million owner-occupied dwellings, compared with 43.9 million rented, according to the Census Bureau.

Those who want to buy a home face the additional hurdle of high prices, which have surged to be out of reach even for people with relatively high incomes in cities experiencing sustained job growth. In 75 of the country's 100 largest metropolitan areas, prices have surpassed their pre-crash highs, according to mortgage data and analysis firm HSH – not adjusted for inflation. Many of these cities, such as Salt Lake City and Raleigh, North Carolina, are also experiencing some of the highest growth in high-paying jobs. The strongest recovery, according to HSH, was in Denver, where home prices have doubled since 2012 in a context of influx of Californian tech workers and New York financial firms. Prices are almost twice as high as before their collapse.

According to MSM, an annual household income of about $ 90,000 is now required to afford Denver's median home price of about $ 471,000. But that assumes that buyers have 20% of that amount, or about $ 94,000, in contribution.

"In this country, the lack of savings to make a down payment is grossly underestimated," says John Pawlowski, housing analyst at Green Street Advisors, who estimates the usual net worth of a tenant at about $ 5,500. "The financial situation of the general public is not good. "

In Stapleton, where Mrs. White lives, the average household income exceeds $ 135,000. Tom Cummings, whose company runs about 240 units in the neighborhood, says his typical tenant is a two-income family with children attracted to high-school neighborhoods. Some have arrived recently and it is not certain that they will remain in the long term. Others can not afford to buy, he says.

Acquiring a home can be effective in building wealth because most people borrow most of the purchase price. This leverage amplifies gains when prices rise, but also increases losses when they fall. This explains the sharp drop in household wealth during the financial crisis and why people are less enthusiastic about owning a home today, despite their constant appreciation for decades.

Mr. Tanner of Invitation compares the behavior with respect to rented houses and rented cars. "Twenty years ago, when people said they were thinking of renting a car, it was like saying a big word. Everyone wanted to own a car, says the 39-year-old CEO. Today, everyone does not care. "

In fact, the idea that houses can lose a significant share of value means that people are led to think of them more as cars, which decay each year. For example, according to a survey by Mortgage Finance Company Freddie Mac, only 24% of renters say it is "extremely likely" that they would ever own a home, which is eleven percentage points lower than four years.

Jacob Neuberger, a thirty-year-old man who works in Denver for an investment company, considered buying when he left his apartment with only one room in the city center. He and his girlfriend have chosen to rent a terraced house for $ 2,700 a month. The one next door sold for $ 550,000. Mr. Neuberger estimated that buying would increase his expenses by about 20% compared to his rent. He would need his semi-detached home to grow about 10% to cover the costs of the transaction if he had to sell to buy a larger house or if he had to move for business reasons. "Price appreciation can not last indefinitely," he says.

Madeline Smith, a local property investor's executive assistant, and her boyfriend, who works in real estate development, nearly bought a house in Denver two years ago. They had quickly made the decision to offer about $ 25,000 more than the asking price under the pressure of the deadline for submitting an offer. During the visit, they began to add expenses for repairs and maintenance.

"The yard was beautiful," says Smith, 29. But who cares? Do we have to go home and take care of it or hire someone? That's more money. "

The couple withdrew their offer and instead Ms. Smith traveled abroad for a few months. Upon his return, they rented an upscale apartment in the city center and are now waiting for prices to fall.

Investors are betting that a large number of current residents of upscale apartments will soon be looking for houses for rent of the same standing in the suburbs. Many individual housing investors believe that high-income tenants are willing to pay to be the first to rent, which has triggered a boom in the construction of rental housing.

In the second quarter, American Homes 4 Rent added 136 houses built specifically for rental to its portfolio while buying only eight existing homes. This is the first period in which the company built more than it bought. The company based in Agoura Hills, California, estimates that it will spend up to $ 900 million this year and next year to offer new properties, primarily by building them with high-income people in mind. . Leaders say they will build around Denver, where the average rent of $ 2,195 is the highest in their portfolio – over $ 300 a month – and other western cities in full swing. boom like Seattle, Salt Lake City and San Antonio.

Located near San Antonio's main highway and in front of one of its best high schools, the new district of Pradera consists of well-ordered houses large enough to accommodate a family, typical of many housing estates. But they are only available for rent.

For Lakisha Caldwell, the neighborhood offers a lifestyle suburban, and this without mortgage or maintenance. "We do not need to cut our own turf. We do not have to worry about changing a light bulb, "she says.

Pradera, where the typical tenant earns more than $ 100,000 a year, could eventually have 250 rental units. This is one of many individual rental housing groups developed by AHV Communities and Bristol Group.

Mark Wolf, the CEO of AHV – headquartered in Irvine, Calif. – says he is looking for land near good schools, employment centers and communication routes where affluent families can afford to rent but not buy.

"Most people do not have $ 5,000 or $ 10,000 to drop into a house," he says.

Ms. Caldwell, who is 32 years old and works for a medical device company, and her husband have been renting since moving to San Antonio eight years ago. They have a ten-year-old son, two life-saving dogs and two children whom they house as host families.

"Some people make me feel guilty about renting. They say, "Oh my God, you spend all that money renting," she explains. She has no desire to become owner at the moment. "I do not want to do what the Jones do in the movie. "