It’s getting harder for people to afford rents, but paying a mortgage is still more affordable on a monthly basis than it was in the years before the housing crisis.
Zillow’s newest affordability report found that rents hit their least-affordable point to date in the second quarter of 2015. U.S. renters can now expect to spend 30.2 percent of their monthly income on rent payments.
In certain markets, the problem is even worse. Renters in high demand markets like Los Angeles, San Jose, Miami and San Francisco can expect to spend more than 40 percent of their monthly income on rent — up over 10 percentage points from historical norms.
Meanwhile, mortgages continue to be affordable for many. Buyers now should expect to spend 15.1 percent of their income on a mortgage payment. In the years before the real estate bubble and burst, borrowers could expect to spend around 21.3 percent of their monthly income on a mortgage payment.
With mortgages being more affordable than rents, it’s a good time to buy — as long as you can afford a down payment, said Zillow Chief Economist Dr. Svenja Gudell.
“There are good reasons to rent temporarily — when you move to a new city, for example — but from an affordability perspective, rents are crazy right now,” Gudell said. “If you can possibly come up with a down payment, then it’s a good time to buy a home and start putting your money toward a mortgage.”
However, saving for a down payment can be difficult when rents are unaffordable. Some overdrawn renters are skimping on health care, let alone saving to buy a home.
For more information on rental and mortgage affordability, check out Zillow Research.
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