With incomes predicted to grow at roughly the same rate by year’s end as home values and rents, housing costs are forecasted to plateau — not improve or get any worse — in some of the nation’s largest cities.
This prediction has to be a slice of good news for renters and homebuyers in San Francisco, Miami, New York City and Los Angeles, as these cities are some of the most unaffordable housing markets nationally.
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According to analysis from Zillow, Miami not San Francisco is the most unaffordable city for rentals nationally, while the city by the bay remains the priciest for homebuyers.
The real estate website estimates Miami residents that lease spend 72 percent of their income on rent. The city is considered the most unaffordable for “typical renters,” with these individuals spending more than 78 percent of their income on rent. Zillow cites a market median rent of $2.151. The Miami metro as a whole is considered the third least affordable major metro for renters.
Things are a bit better for homebuyers in Miami, as these individuals spend roughly 37 percent of their income on monthly mortgage payments. This percentage assumes a buyer puts down at least 20 percent at the time of purchase.
In San Francisco, renters and homebuyers both contribute more than 50 percent of their income toward housing, at 55 percent and 52 percent, respectively. Zillow considers the city one the most unaffordable cities for both the “typical renter” and “typical homeowner.” The later group sets aside 57.2 percent of their income to make monthly mortgage payments.
The San Francisco metro area, not the city itself, is considered the second most unaffordable market for both homeowners and renters.
Affordability not much better in nation’s two largest cities
Los Angeles and New York City homebuyers are said to spend roughly 43 percent to 44 percent of their income on mortgage payments.
In L.A., buying a home remains a cheaper option than renting for those that can qualify and put down 20 percent, as renters are said to contribute more than half of their income (51 percent) towards housing costs. In New York City, renters and buyers both commit 44 percent of their incomes toward housing costs.
The rental affordability situation is similar in D.C. to these two cities, as those that lease in the district spend 40 percent of their incomes on rent. Homebuyers in the district spend 30 percent of their incomes on mortgage.
Major cities where buying beats renting
Residents in Houston, Baltimore and Chicago all spend 35 percent of their incomes on rent; however, homeowners in these cities contribute less than 20 percent of their income toward a mortgage.
“Unlike paying a mortgage, paying rent today is much less affordable than it was historically,” Zillow stated in its analysis.
Of the three, Baltimore is considered the most affordable city for buyers, as homeowners reserve roughly 11 percent of their earnings for monthly mortgage payments. In Houston and Chicago this income percentage stands at 13 percent and 16 percent, respectively.
