Share This Tip With Renters Who Want to Own
DAILY REAL ESTATE NEWS | WEDNESDAY, OCTOBER 05, 2016
As renters face escalating housing costs, you should be concerned that it's getting harder for them to save for a home purchase. Is there anything you can tell them to do to help their chances of being financially prepared to transition to home ownership? Actually, there is — and it's pretty basic advice: Get a roommate.
A new study shows that renters could potentially save anywhere between $25,000 and $100,000 over the long haul by sharing space with a roomie. Savings like that can help them break into ownership much faster.
A record-high 11 million renters are spending at least half of their incomes on housing — an amount financial experts say is too much — and an additional 21 million are paying 30 percent or more, according to the annual State of the Nation's Housing Report from Harvard University's Joint Center for Housing Studies. The high rents are making it difficult for renters to save enough for a down payment on a home, according to a 2015 study by the National Association of REALTORS®.
But a renter who lives with a roommate in a two-bedroom apartment and splits the rent 50-50 could potentially save an average of $420.70 a month versus a renter who lives in a one-bedroom apartment alone, according to financial website SmartAsset.com. In just five years, that could amount to a savings of $25,242.
In high-priced markets such as San Francisco, the savings could be more than double. A renter living alone may shell out $3,548 a month for a one-bedroom apartment in the City by the Bay, but splitting the cost of a two-bedroom apartment with a roommate may cut that to $2,443 a month. That's a savings of more than $1,100 a month — and $26,400 over two years or $66,000 over five years.
Even so, more renters are showing a preference for living alone. The number of Americans living alone increased from about 5 percent in the 1920s to 27 percent in 2012, according to Census Bureau data.
SmartAsset.com found that the following 10 cities offer the biggest savings potential for renters who live with a roommate:
- San Francisco: $1,106 (monthly savings for a two-bedroom with a roommate versus a one-bedroom alone)
- New York: $1,030
- San Jose, Calif.: $841
- Boston: $810
- Oakland, Calif.: $733
- Washington, D.C.: $590
- San Diego: $564
- Los Angeles: $558
- Long Beach, Calif.: $554
- Portland, Ore.: $546
Source: “A Simple Way Millions Can Save $100,000,” MarketWatch (Oct. 4, 2016)