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Renters vs owners: Why they see the economy “differently”.

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<p class=In the US how they view the economy depends on whether they rent or own a home – What has changed after the pandemic

“How is the economy?”. The answer to this question largely depends on whether one owns the house one lives in, or rents it.

The latest data shows that renters are struggling more financially, while homeowners continue to reap the benefits of refinancing during the pandemic, when mortgage rates were at historic lows. At least that's the case in the United States.

The widening gap has complicated the Fed's efforts to reduce inflation, with homeowners supporting consumer prices.

“The post-pandemic economy is treating people very differently, creating a headache for central bankers,” Jeffrey Roach, chief economist at LPL Financial, wrote in a research note last week. “Extreme differences can often be found in living situations, as renters have a very different experience than homeowners.”

“Unaffordable for renters”

< p>Since the start of the pandemic, rents have risen more than 20 percent, Roach noted, with renters paying about $370 more each month on average.

“A tough housing market for people. across the country has become, in many cases, almost unaffordable for renters across the country,” Samus Roller, executive director of the National Housing Law Project, told Yahoo Finance.

How unbearable? Nearly 1 in 5 renters (19%) reported having trouble paying their rent at some point in the past year, according to a Federal Reserve report this week, up from 17% in 2022.

They were also more likely to report not paying all their bills in the previous month, relative to homeowners. In every type of bill — water, gas or electricity bill or phone bill — renters had higher non-payment rates.

“Even if they're not struggling to pay rent, rent eats up so much of their income that they have very little left over for other things in life, and that creates stress,” Roller said.

“They feel a level of financial insecurity … in the midst of an economy that is doing very well.”

“If you have a home, you feel better”

The fortunes of of homeowners look very different.

About a third of homeowners refinanced their mortgages in 2020 or 2021 when mortgage rates hovered around 3 percent or lower, Roach wrote. As a result, they saved about $220 a month on average, with their mortgage payments taking up an almost historically low share of their disposable income.

And unlike renters, their mortgage payment it's a “fairly predictable cost” going forward, Roller noted, making it easier to budget for future expenses.

“I think if you own a home, you feel better about it,” Roller said.

Homeowners are also more likely to own stocks than renters, so they've benefited from significant gains in the stock market. over the past year and a half.

Of course, homeowners have had to absorb higher homeowner insurance costs.

And those who bought in the past two years, when mortgage rates doubled during during the Fed's rate hike to fight inflation, they spend an average of $2,100 per month on their mortgage payments, or $700 more than they bought before the pandemic, according to the Fed study.

However, more homeowners remain better off financially than before the pandemic, and that has “kept the economy out of recession,” Roach wrote.

The question remains. how long will this take…

Source: 24h.com.cy

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