Dave:
That is surprising.
Lu:
Yeah, that is surprising.
Dave:
Wow. Okay, so I just want to make sure everyone listening knows what we’re talking about. So when we’re talking about affordability, there’s different metrics. Sometimes people are talking about home buyer affordability. Right now it sounds like we’re talking about rental affordability for the average American. Is that right?
Lu:
That is correct. And there is a simple formula cookbook into there which is essentially comparing how much our renter are paying for the whole year, 12 months total rent plus utility as a ratio of your household income. So as a standard rule of thumb, if the rental income ratio is above 30%, meaning you are paying 30% of your disposable income just on rental is considered unaffordable. Of course there is even more severe measure, which is half if you are spending half of your disposable income on rent, that is severely room burdened and luckily we have never as a nation heading into that level yet, but 30% was pretty unaffordable for many places, especially some of the gateway metros. New York has always been on the top list, Florida, Los Angeles, all these bigger metros which has more acute affordability issue, but nonetheless the nation has been seeing some easing over the past year and a half.
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