Taylor Scott International News
People renting a home in the United States can expect to pay twice as much of their incomes on their rent than an owner on mortgage payments, new research has found. It means that it is more affordable to buy a home now in most US metros than it was 15 years ago, even for those putting down less money on a home, according to a Zillow analysis of third quarter income and home value data. Renters, however, continue to pay an increasing share of their income to their landlords as rents soar and incomes remain flat. On average, US home buyers making the nation's median income and purchasing the typical home spend 15.3% of their income on their monthly house payment, down from the historical norm of 22.1% during the pre-bubble period from 1985 to 1999. On the other hand on average, US renters spent 29.9% of their monthly income on rent in the third quarter of 2014, up from 24.9% historically. Younger buyers, earning less money in many areas and making smaller down payments on a home, should expect to spend slightly more of their income on mortgage payments at around 17.4%. The Zillow report says that homes for younger buyers remain affordable thanks to continued low mortgage interest rates and their tendency to shop for less expensive properties. However, the report warns that continuously rising rents across the country could drive more people into the home buying market, but they also make it more difficult for first time buyers to save for a down payment. A breakdown of the figures shows that Washington DC renters can expect to spend 27.1% of their income on rent, up from 16.2% historically while in Miami, rent as a percentage of income has risen from 26.5% before the bubble to 44.5% currently. ‘Despite rising home values, homeownership remains very accessible for buyers that can scrape together a down payment, even if that down payment is relatively modest, find a home to buy and secure financing,’ said Zillow chief economist Stan Humphries. ‘But what keeps me up at night is the fact that it still remains so difficult for so many potential buyers to make those particular stars align, largely because renting is so unaffordable these days,’ he explained. ‘It's very difficult to come up with a down payment when so much of your monthly pay cheque, especially on an entry level salary, is going to your landlord instead of into your savings. Buying conditions are getting better every day, and in time the allure of fixed housing payments and building wealth through home equity will draw more buyers out of rentals and into home ownership,’ he added. The report also points out that home ownership rates in the US have steadily declined, even as the housing market has recovered, in part because millennials have delayed their entry into the housing market. But it is likely that by the end of 2015, millennials aged 23 to 34, will overtake Generation X as the biggest… Taylor Scott International
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