Cities With ‘Plummeting’ Rents And Housing Prices

As of last week, the national median rent for a one-bedroom apartment is $1,526 and $1,900 for a two-bedroom. Those numbers are up 1.5% and 1.9%, respectively, according to Zumper’s rent report.

Realtor.com puts the national median cost to buy a home at $442,500, as of May.  

Within those national numbers, there are instances of significant price increases and decreases in dozens of cities. Almost to a headline, when the media reports on (glosses over) this data, they frame the situation as if the price decreases — often fronted with adjectives such as plummeting — are meaningful to the average American. 

As The Juice likes to say, a decrease in the cost of housing these days usually doesn’t make it affordable, especially for folks struggling to make ends meet. 

If you’re doing well financially, any savings is beer money. If you’re not, chances are the decreases the media highlights won’t materially change your situation. 

It’s worth repeating the two pieces of subscriber feedback we featured last week in The Juice where we looked at a hypothetical budget to illustrate that, on right around average income, there’s not much, if any money left over at the end of the month. 

Subscriber #1: With the cost of renting today, who can afford to invest what’s left over into the stock market? There’s nothing left over. Please get real.

Subscriber #2: Great to see that someone is writing about these issues and keeping people informed about what is realistically happening. The cost of renting has nowhere to go but up also.

We agree. And, even when it goes down, well, yeah, like, get real. 

If you use the affordability standard of spending no more than 30% of your income on housing, you need to earn about $6,333 a month, or roughly $76,000 annually to be able to afford that $1,900 two-bedroom pad. 

To buy that $442,500 typical home in America, up that monthly number to $11,333 and the annual figure to almost $136,000. 

As we speak, the median wage is a few hairs below $55,000.

It doesn’t take a math whiz to see the problem. If you use the median on housing costs and income, you can’t afford a damn thing. It takes almost $2,000 more a month than the median wage to afford the median two-bedroom and a whopping $7,000 or so more to afford the median home for sale. 

Enough said. 

So, when we see people writing articles about housing price decreases as if they matter, we angrily spit some pulp through our nose. 

For example, the two cities with the largest price decreases on two-bedroom apartments were Jersey City and Oakland. Places that used to be safe and affordable havens for people who could no longer afford New York City or San Francisco. 

In Jersey City, the cost of a two-bedroom dropped 10.9% to $3,530. In Oakland, it went down 7.4% to $2,620. The above-calculated numbers tell you all you need to know. 

But, okay, some maybe good news. There are places on the list of decreases like #3 Kansas City, where the price declined 6.4% to $1,310. This means the rent came down by, on average, $84. That’s $1,000 over the course of a year. 

Sounds great, but Kansas City was already relatively affordable. What does a drop from $1,394 to $1,310 mean for anybody but the person who has had enough of the Tri-State or Bay Areas? The people who come to places like Kansas City and, ultimately, help drive up once-affordable prices. 

We’re seeing this happen in many names that populate the list of the biggest rental price increases in the last month. Syracuse is up 25% to $1,500. Buffalo is up 13.3% to $1,450. Newark, New Jersey is up 15.8% to $2,200. In the types of places that, in some cases, are about to become the next Jersey City, Oakland, Portland, Austin or Denver, the writing is on the wall. 

They’re about to become less affordable and, The Juice thinks, unaffordable within the next 2-5 years.  

Similar story if you’re looking to buy. 

There are places with seemingly meaningfully recent price decreases. 

Miami saw the largest year-over-year price decrease on a median single-family home. The typical house there now goes for $439,000. That’s down 11.2%. 

Sizable decrease, yes. However, it still requires more than six figures to be able to afford the median-priced home in Miami. And, not to be jerks, but we’re going to guess it won’t be your dream house in your target neighborhood. 

For the most part, the cities posting the steepest price decreases over the last year read like a who’s who of housing unaffordability. The only people who benefit are the already well off. They likely won’t even notice the “savings,” which amounts to a rounding error for them. And, if they do, it’s pocket change to take an extra luxury weekend getaway or European vacation.

We’re talking a 6.3% drop in the median price of a home in Denver to $639,000. Or a 5.5% fall in Seattle to $777,000. 

You don’t want to know how much you have to make to “afford” those prices. But we’ll tell you anyway. 

$197,676 in Denver and $240,360 in Seattle. 

So, note to the rest of the media: Mind the superlatives you use when you attempt to describe any decrease in housing prices. Put some freaking (useful) context around the story. 

The Bottom Line: If you own a home with a low mortgage interest rate, no mortgage and/or a ton of home equity, count your blessings. Sure, this might not be the best time to move, particularly if you want to upgrade. But, with housing taken care of, relative to many less fortunate others, you have a significant piece of your personal financial puzzle taken care of. 

You might just be one of the ‘haves’ in this haves and have nots economy.

• Top 5 Dividend ETF Searches By Financial Pros
• Beyond Traditional Investments: Embrace Diversity
• 5 ETFs You’ve Probably Never Heard Of
• Financial Pros Top 5 Corporate Security Stocks