According to new research from Zillow
, purchasing a home today is more affordable than it has been historically in 94 of the country’s largest metro areas. Meanwhile, renting a home is less affordable in 88 of the 100 largest markets.
“In many areas, as long as you have saved for a 20 percent down payment, monthly payments on a mortgage for a typical home consume a smaller portion of a median household’s income than they did in the years leading up to the housing bubble,” wrote study author Meredith Miller. “The share of income devoted to rent, on the other hand, is well above historic norms in most places.”
In the second quarter of 2014, a typical household earning the national median income would need to earmark slightly more than 15% of its income to making the mortgage payment, assuming a 20% down payment, according to Zillow. But renters in the same financial boat who signed a lease in 2014 would be sinking 30% of their income into rent.
“In other words, it is currently very unaffordable to rent a home,” Miller wrote.
General wisdom is that rent shouldn’t exceed 30% of the renter’s income. But in 99 metro areas analyzed by Zillow, renters generally paid 30% or more. In large cities like Los Angeles, renters paid nearly half their income toward rent.
But rents are getting higher even in less expensive parts of the country. since 2000, rents have grown an average of 59% nationally, while median household income has only grown 26%.
Is the growing cost of rent a selling point for your customers? Have you seen an increasing number of renters taking the plunge into home ownership? Let us know in the comments.
Good news for the mortgage industry – with the cost of rent getting higher, buying a home is becoming the more affordable choice in many parts of the country.