Dive Brief:
- According to a third-quarter Zillow analysis of U.S. rental and mortgage affordability, rental affordability declined in 28 of the 35 largest metro areas over the past year, and mortgage affordability worsened in 18, making renting still less affordable than paying a mortgage.
- Buying a home is a better financial deal across most of the U.S., Zillow found, but 34 of the 35 largest metro areas have such high rents — and rising home values — that first-time homebuyers are having a hard time saving enough money for a down payment. The Pittsburgh market is the exception, with rents lower than the historical average.
- According to Zillow’s analysis, on average, homeowners spend 15% of their monthly income on a mortgage, while renters spend 30% of monthly income on rent.
Dive Insight:
Earlier this month, the National Association of Realtors reported a 30-year low in the industry’s share of first-time homebuyers and cited rising rents and rising home values as the primary causes. The NAR also blames still-tight credit requirements.
"In general, paying a mortgage is more affordable than renting and has been for some time. Unfortunately, many current renters aren't able to realize the savings that come with homeownership because as home values and rents keep rising, it's getting increasingly difficult to clear the down payment hurdle," Zillow Chief Economist Svenja Gudell said.
With potential buyers unable to save up for a down payment, they are remaining in the rental sector — which means bad news for the single-family market. Many residential experts predicted 2015 would see strong first-time buyer activity as a natural result of low mortgage rates, job and income growth, but that hasn't been the case so far.
