SAN FRANCISCO–It’s only becoming more difficult for many renters to purchase a home of their own, according to a new report, which suggests renters might want to move to Pittsburgh.
In addition, homeowners are now spending less on house payments now than they did in the more typical housing market years of 1985 to 2000, the same report has found.
As CUToday.info has reported, putting together a downpayment in a market of rapidly appreciating home prices is a big obstacle for many. Now a report from Zillow shows that renters are spending nearly $2,000 a year more in 2017 than they would have been prior to the housing bubble.
According to Zillow’s analysis, the median U.S. rental costs 29.1% of the median monthly income. In the years between 1985 and 2000, typical renters were spending 25.8% of their income on rent (a difference of $1,957 per year).
Among the other findings in the Zillow report:
- Renters in 34 of the nation’s 35 largest markets spend a larger share of income on rent now than they did historically
- Homeowners now spend $3,300 less a year on mortgage payments than they would if mortgage payments required the same share of income as they did historically
In some markets, the difference is far greater, Zillow noted: Renters in San Jose, Calif., for instance, spend 38.4% of their incomes on rent, compared to 26% historically, which translates to a total of $13,525 more in rent this year.
In Dallas, the $5,298 annual difference would be enough to save a 20% down payment for a typical home in the market in eight years, based on the September median home value in Dallas of $214,800, Zillow said.
Zillow further reported that “In general, homeowners spend less of their income on house payments now than they did in the more typical housing market years of 1985 to 2000 – thanks in part to low mortgage interest rates, which keep monthly costs low even as housing costs rise. The difference, between 21% then and 15.4% now, means people are spending about $3,300 less per year on the typical mortgage, the Zillow analysis found.
Meanwhile, Zillow found that while rent affordability has worsened in 34 of the nation’s 35 largest markets, rents in Pittsburgh have remained mostly level over the past several years, allowing incomes to keep up and even outpace rent appreciation. Renters in the Pittsburgh metro now spend a smaller share of income on rent than they did in pre-bubble years, meaning they are spending about $3,400 less per year than they would have at the historical rate, Zillow said.
Even in Pittsburgh, where rents have remained low enough that renters now spend $3,400 less a year than they would at the historical rate, the typical mortgage payment takes an even smaller share of income, according to Zillow. Rent in Pittsburgh takes 22.5% of the typical renter’s income, down from 28.4% historically. But a mortgage payment takes just 10.8%—thanks in part to low interest rates.