Nationally, too, rents are soaring while mortgages remain affordable.
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She thinks, though, that Zillow might be overstating the impact that high rents have on the ability to afford down payments. The perception of renting out long term is actually not a smart idea nowadays because of the soaring rental rates.
“There are good reasons to rent temporarily – when you move to a new city, for example – but from an affordability perspective, rents are insane right now”, said Svenja Gudell, Zillow’s chief economist.
Between 1995 and 2000, renters on average spent just over 24% of their incomes on rents. “That house rented in like a day”. If rates reach six percent next year, home buyers can still expect to spend 30 percent or less of their income on mortgage payments in 265 out of 290 (91.4 percent) of the metros Zillow analyzed, and mortgage payments will be considered more affordable than in pre-bubble years in 72.1 percent of metros. Aside from the fact that they were at the mercy of their landlords, the monthly mortgage percentage payments has dropped to 14% from 19.8 percent.
Statewide, the affordability measure – which combines housing, mortgage and income trends – translates this way: 30 percent of California households can comfortably buy a median-priced, existing single-family home. That may not seem like a big deal, but across the U.S., mortgage payments on the median house consume 15.1 percent of the median income. That is the highest percentage ever, said Zillow, which has data going back to 1979.
Rental affordability worsened year-over-year in 28 of the 35 largest metro areas covered by Zillow. If you want to ask yourself, when is the best time to rent a house, the answer is definitely not now.
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Rent burdens are rising above historical averages in many U.S. cities, and Denver renters aren’t necessarily the most burdened.
