The asking price for renting a two-bedroom unit increased by 3.75% nationwide in 2011 while the price of buying one dropped by nearly 2%, a clear sign that many Americans have shifted to renting rather than buying in the aftermath of the recession, according to a new report from the housing search engine HotPads.com.
For certain cities, the changes were even more significant. In Chicago, for example, two-bedroom rental prices increased by nearly 20% while the cost of buying a two-bedroom unit decreased by 10%. As a result, it’s now just 7.7 times more expensive to buy a two-bedroom property in Chicago than it is to rent one for a year, making it one of the lowest buy-to-rent ratios of the 20 cities HotPads analyzed.
Other cities like Detroit, New York and Riverside, Calif., have seen their buy-to-rent ratios plummet as well. In each of these three cities, the cost of buying a two-bedroom is now less than 10 times the cost of renting one for a year, meaning those looking for a place to live in these cities may have a harder time justifying not buying property.
Much of this trend can be chalked up to a greater demand for rentals from those weary of owning property after the housing crisis combined with a limited supply of rentals. However, HotPads predicts this may begin to change in the coming year.
“We… predict more foreclosed and long-standing for sale properties will re-enter the market as rentals in 2012, which should increase the rental supply and help ease prices,” the report notes. “However, if economic conditions extend consumer uncertainty, we may continue seeing would-be homeowners continue to rent.”