SEATTLE—A new report indicates that more renters will turn to home ownership in 2015.
A study by real estate company Zillow indicates that soaring rents due to a constrained supply of rental housing will force the movement.
In 2014, U.S. renters paid a collective $441 billion in rent, up $20.6 billion, or 4.9%, from 2013, according to Zillow. That translates to $26 more per month for the average renter. In some markets, increases were higher: San Franciscans paid over 14% more in rent, while renters in Denver forked over nearly 11% more. New York City renters paid more than 10% of all the rent paid in the nation.
"Over the past 14 years, rents have grown at twice the pace of income due to weak income growth, burgeoning rental demand, and insufficient growth in the supply of rental housing," Zillow Chief Economist Stan Humphries told CNBC. "(In 2015) we expect rents to rise even faster than home values, meaning that another increase in total rent paid similar to that seen (in 2014) isn't out of the question. In fact, it's probable."
While developers in 2014 started the largest number of new rental units in 25 years, there is still a short supply of rental housing, both single and multifamily, and that means rents will continue to rise.
"We expect soaring rents to entice more people to the relative stability of home ownership, particularly younger potential buyers," said Humphries told CNBC.
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