I have also experienced a widening rent/income gap.
This post has stuck in my mind for several days, and as a reality check I went back and looked at my pay slips and lease agreements for 2001, the last time I was financially “comfortable”.
I found that at that time, my rent was some 23% of my gross income.
Fast forward to today, my pay is 111% what it was in 2001 (i.e., it has risen 11% in the past 7 years). Meanwhile, the very same apartment I used to live in, is now nearly 150% the rent– it went from $1090 to $1515. If I rented there today, I would be spending 30% of my gross income on rent, or literally half my take-home pay.
. . .
My (extremely rough) rule of thumb is that $600 in monthly payment is roughly equivalent to $100,000 in house price, for a 30-year fixed mortgage. When I apply this rule to a published rent, I get an estimate of “what the rent says the house is worth”. Rents in RB currently imply home values of $250,000 for 2-bedroom condos, and $400,000 for single-family homes. Actual condos in RB are being listed in this neighborhood now (mostly by the converted complexes and the builders). Houses have a ways to go on this.
But if prices of houses and condos were to more truly fall back into line with incomes, where they were in 2001, they would have to fall to $181,000 for the 2BR condos not counting HOA fees, and probably more like $140,000 assuming a (low) HOA of $250. I neglect the property tax here, because with the federal income tax deduction for mortgage interest, for a new buyer the tax gain and the property tax are about a wash.
Who knows if prices and rents will actually ever fall to reasonable ratios vs incomes; I guess we will see.
