Renting Twice as Expensive as Buying, Says Zillow Report

(c) Can Stock Photo (Jeff Sorg, OnlineEd) –  With prices rising and inventories falling, it’s now more affordable to buy a home in most US metro areas than it was 15 years ago, according to a report by Zillow analyzing third quarter income and home value data.

According to Zillow’s analysis of trends, on average, homeowners making the nation’s median income and purchasing the typical home spend 15.3 percent of their income on their monthly house payment, down from the historical norm of 22.1 percent during the pre-bubble period from 1985 to 1999. On average, U.S. renters spent 29.9 percent of their monthly income on rent in the third quarter of 2014, up from 24.9 percent historically.

“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 Dr. 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. It’s very difficult to come up with a down payment when so much of your monthly paycheck – 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 homeownership.”

With affordable prices and new products like Fannie Mae’s 3% downpayment program for first time buyers, many experts expect that Millennials (aged 23-34) will overtake Generation X as the biggest group of U.S. homebuyers by the end of 2015.

Metro Area

 Q3 2014 Median Household Income

 Zillow Home Value Index

(Q3 2014)

% of monthly income devoted to mortgage payments

(Q3 2014)

% of monthly income devoted to mortgage payment for first-time homebuyers

(Q3 2014)

% of monthly income devoted to rent

(Q3 2014)

United States

$        53,620

$        176,500

15.3%

17.4%

29.9%

New York, NY

$        69,337

$        381,600

25.6%

30.6%

40.5%

Los Angeles, CA

$        60,650

$        531,000

40.8%

50.7%

47.9%

Chicago, IL

$        62,652

$        188,200

14.0%

16.2%

31.5%

Dallas, TX

$        61,310

$        148,400

11.3%

14.5%

27.7%

Philadelphia, PA

$        64,823

$        202,700

14.6%

18.1%

28.8%

Houston, TX

$        59,953

$        150,300

11.7%

15.0%

29.4%

Washington, DC

$        92,610

$        359,300

18.1%

24.0%

27.1%

Miami, FL

$        47,896

$        205,200

19.9%

21.2%

44.5%

Atlanta, GA

$        59,927

$        151,900

11.8%

15.2%

24.1%

Boston, MA

$        75,059

$        362,700

22.5%

26.3%

34.1%

San Francisco, CA

$        77,409

$        689,900

41.5%

43.3%

45.9%

Detroit, MI

$        52,694

$        113,500

10.0%

10.6%

24.1%

Riverside, CA

$        54,085

$        277,900

23.9%

28.8%

36.4%

Phoenix, AZ

$        53,487

$        193,700

16.9%

20.9%

27.3%

Seattle, WA

$        70,352

$        333,700

22.1%

27.3%

30.8%

Minneapolis, MN

$        69,569

$        213,100

14.3%

17.7%

26.1%

San Diego, CA

$        63,607

$        466,100

34.1%

42.9%

42.5%

St. Louis, MO

$        54,746

$        129,100

11.0%

12.5%

24.1%

Tampa, FL

$        46,050

$        145,400

14.7%

14.7%

32.4%

Baltimore, MD

$        72,010

$        241,800

15.6%

19.0%

28.5%

Denver, CO

$        64,120

$        271,200

19.7%

25.4%

32.9%

Pittsburgh, PA

$        51,668

$        123,800

11.2%

11.7%

26.6%

Portland, OR

$        60,071

$        274,100

21.2%

28.3%

30.5%

Sacramento, CA

$        59,161

$        325,800

25.6%

31.1%

32.2%

San Antonio, TX

$        51,884

$        144,300

12.9%

15.1%

29.6%

Orlando, FL

$        48,905

$        168,100

16.0%

19.7%

32.1%

Cincinnati, OH

$        55,093

$        135,900

11.5%

13.9%

26.0%

Cleveland, OH

$        49,842

$        120,600

11.3%

13.9%

27.7%

Kansas City, MO

$        58,212

$        137,400

11.0%

13.2%

24.2%

Las Vegas, NV

$        51,609

$        181,600

16.4%

19.3%

27.5%

San Jose, CA

$        99,230

$        813,500

38.2%

43.7%

37.9%

Columbus, OH

$        55,836

$        144,300

12.0%

14.1%

27.0%

Charlotte, NC

$        55,332

$        155,900

13.1%

15.3%

26.3%

Indianapolis, IN

$        55,238

$        128,100

10.8%

13.5%

25.8%

Source: Zillow

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  This article was published on December 10, 2014. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.

Jeff Sorg

About the Author

Jeff Sorg is a co-founder of OnlineEd®, a Web-based vocational school founded in 1997 where he also serves as Corporate Secretary, Chief Operating Officer, and School Director. Sorg holds vocational instructor licenses in Oregon, Washington, California, and Nevada and has authored numerous pre-licensing and continuing education courses. Sorg was awarded the International Distance Education Certification Center's CDEi Designation for distance education in 2008. OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.