A popular standard for budgeting rent is to follow the 30% rule, which is spending a maximum of 30% of a gross monthly income on rent.
Not so this year, for most Americans.
In September 2022, the average U.S. employee will spend 46.38% of their monthly income on rent, data issued by Zillow Group Inc (NASDAQ:ZG) (NASDAQ:Z) showed.
What Happened: The average work week for all employees on private nonfarm payrolls in the U.S. was at 34.5 hours.
With that, the typical U.S. employee will work 138 hours per month, on a four-week average.
According to Zillow’s data, the average U.S. worker would've had to put in over 64 hours of work to be able to afford the average rent payment in September.
— Aj (@aj_whoWrites) November 2, 2022
This means that they’re spending about 46.38% on rent — or an increase of a full 8-hour work day compared to the same time two years ago, when workers had to put in around 56 hours to be able to afford rent.
Why It Matters: Asking rents in the U.S. reached a record high in August, but for the third consecutive month rent growth decelerated slightly as potential renters struggled with rising costs.
Redfin data indicated that while the median national asking rent increased 11% year-over-year to $2,039, it decreased from a peak gain of 19% in March, making it the weakest annual growth in a year.
The median asking rent increased by 0.4% month over month, which is the weakest gain since December 2021 and less than the 1.6% increase seen a year earlier.
“Rent growth will likely slow further as the Federal Reserve continues to raise interest rates. Higher interest rates impact the rental market because they put a damper on spending power in the economy as a whole, including renters’ budgets,” said Taylor Marr, Redfin deputy chief economist.
Marr added, "growth in rents is also likely to be slowed by a boost in rental supply. There are nearly a million rental units under construction that will hit the market in the coming months and years."
According to recent information published in a Labor Department report on consumer prices, the September increase raised shelter inflation for the past 12 months to 6.6%, the largest over any such time since 1986.
Laura Rosner-Warburton, a senior U.S. economist at the New York-based research firm MacroPolicy Perspectives, said it will peak out at approximately 6.9% in January before slowing down to about 4.7% by the end of 2023.
To read about the latest developments in the industry, check out Benzinga's real estate home page.
Photo: David Orcea via Shutterstock
