More than Half of For-Sale Homes in Seven Major Markets are Currently Unaffordable for Typical Buyers
Buyers in Southern Calif., Bay Area, Denver, Portland & Miami May Have Trouble Finding Affordable Homes, According to Zillow; More Communities Risk Becoming Unaffordable as Mortgage Rates Rise
- Home buyers making the median income in Los Angeles, San Francisco and San Jose are currently paying a larger share of their income toward a mortgage than during the pre-bubble years.
- At 5% mortgage interest rates, home buyers in San Diego, Riverside, Portland, Sacramento & Miami will also be paying more of their incomes to mortgages than they have historically.
Nationally, only one-third of homes currently for sale are unaffordable by historical standards.
SEATTLE, April 4, 2014 /PRNewswire/ -- More than half the homes currently on the market in seven major American metros are currently unaffordable for local residents, according to a Zillow® analysis of Q4 2013 income, mortgage and home value data. Additionally, homebuyers looking for affordable properties may increasingly be forced to search on the perimeter of the country's largest metro markets, as downtown properties become out of reach for buyers of typical means.
Zillow determined affordability by analyzing the current percentage of an area's median income needed to afford the monthly mortgage payment on a median-priced home[i], and comparing it to the share of income needed to afford a median-priced home in the pre-bubble years between 1985 and 2000. If the share of monthly income currently needed to afford the median-priced home is greater than it was during the pre-bubble years, that home is considered unaffordable for typical buyers.
Among the 35 largest metros nationwide, more than half of homes currently listed for sale[ii] in Miami (62.4 percent), Los Angeles (57.2 percent), San Diego (55.3 percent), San Francisco (55.2 percent), Denver (52.8 percent), San Jose (50.9 percent) and Portland, Ore. (50.3 percent) are unaffordable by historical standards.
Nationwide, just one-third of homes (33.6 percent) are currently unaffordable, and in many metro areas, the majority of homes remain more affordable now than they have been historically for buyers making the area's median income. But as mortgage interest rates rise along with home values, affordability will worsen, and buyers will need to spend ever-larger shares of their incomes to buy increasingly expensive homes.
Home buyers making the median income in Los Angeles, San Francisco and San Jose should already expect to pay a larger share of their income today toward a mortgage than during the pre-bubble years. Zillow expects mortgage rates on a 30-year, fixed-rate mortgage to reach or exceed 5 percent by the first quarter of 2015. Assuming rates at that level and another year of forecasted home value growth, home buyers in San Diego; Riverside, Calif.; Portland, Ore.; Sacramento; and Miami will also soon be paying a larger share of their incomes to their mortgage than they were during the pre-bubble years.
"As affordability worsens, we're already beginning to see more of the kinds of worrisome trends we saw en masse during the years leading up to the housing crash. These include a greater reliance on non-traditional home financing, smaller down payments and a greater pressure to move further away from urban job centers in order to find affordable housing options," said Zillow Chief Economist Dr. Stan Humphries. "We're not in a bubble yet, but we're beginning to see the early signs of one in some areas."
| Metro Area |
Q4 2013 Median Household Income |
Zillow Home Value Index (Q4 2013) |
% of homes currently on the market that are unaffordable by historic standards |
Current % of monthly income devoted to mortgage payments on median-priced home (Q4 2013) |
Historic % of monthly income devoted to mortgage payments on median-priced home (1985- 2000) |
| United States |
$ 52,830 |
$ 169,300 |
33.6% |
15.1% |
22.1% |
| New York, NY |
$ 68,716 |
$ 367,800 |
41.8% |
25.3% |
31.6% |
| Los Angeles, CA |
$ 59,712 |
$ 498,200 |
57.2% |
39.6% |
35.2% |
| Chicago, IL |
$ 61,434 |
$ 177,300 |
31.8% |
13.7% |
22.6% |
| Dallas, TX |
$ 60,140 |
$ 144,100 |
35.1% |
11.3% |
20.8% |
| Philadelphia, PA |
$ 63,918 |
$ 193,300 |
33.9% |
14.3% |
19.6% |
| Houston, TX |
$ 59,539 |
$ 143,800 |
44.5% |
11.3% |
17.0% |
| Washington, DC |
$ 91,689 |
$ 343,600 |
40.1% |
17.8% |
22.1% |
| Miami, FL |
$ 47,715 |
$ 184,600 |
62.4% |
18.2% |
20.7% |
| Atlanta, GA |
$ 57,797 |
$ 136,400 |
37.3% |
11.1% |
19.9% |
| Boston, MA |
$ 74,374 |
$ 350,100 |
40.1% |
22.3% |
27.8% |
| San Francisco, CA |
$ 77,184 |
$ 639,800 |
55.2% |
39.3% |
37.7% |
| Detroit, MI |
$ 52,623 |
$ 105,300 |
31.8% |
9.5% |
16.9% |
| Riverside, CA |
$ 53,645 |
$ 256,800 |
43.5% |
22.6% |
25.2% |
| Phoenix, AZ |
$ 53,556 |
$ 187,900 |
44.6% |
16.6% |
22.3% |
| Seattle, WA |
$ 67,944 |
$ 309,100 |
37.0% |
21.5% |
25.6% |
| Minneapolis, MN |
$ 69,050 |
$ 197,300 |
31.8% |
13.6% |
19.2% |
| San Diego, CA |
$ 63,404 |
$ 440,400 |
55.3% |
32.8% |
32.9% |
| St. Louis, MO |
$ 53,820 |
$ 131,500 |
30.0% |
11.4% |
17.0% |
| Tampa, FL |
$ 45,598 |
$ 134,400 |
41.1% |
13.9% |
18.9% |
| Baltimore, MD |
$ 70,708 |
$ 236,300 |
38.3% |
15.8% |
20.8% |
| Denver, CO |
$ 63,581 |
$ 243,200 |
52.8% |
18.1% |
21.6% |
| Pittsburgh, PA |
$ 50,985 |
$ 120,300 |
36.4% |
11.1% |
15.6% |
| Portland, OR |
$ 59,724 |
$ 259,100 |
50.3% |
20.5% |
22.7% |
| Sacramento, CA |
$ 58,789 |
$ 304,800 |
47.3% |
24.5% |
29.3% |
| San Antonio, TX |
$ 50,898 |
$ 147,200 |
33.5% |
13.3% |
22.7% |
| Orlando, FL |
$ 48,434 |
$ 153,000 |
41.3% |
14.9% |
20.8% |
| Cincinnati, OH |
$ 54,190 |
$ 131,400 |
24.3% |
11.4% |
19.4% |
| Cleveland, OH |
$ 49,243 |
$ 115,700 |
24.9% |
11.2% |
19.8% |
| Kansas City, MO |
$ 57,132 |
$ 139,600 |
25.3% |
11.4% |
18.3% |
| Las Vegas, NV |
$ 51,177 |
$ 167,600 |
31.9% |
15.4% |
24.1% |
| San Jose, CA |
$ 97,191 |
$ 743,500 |
50.9% |
36.0% |
34.9% |
| Columbus, OH |
$ 55,073 |
$ 136,400 |
24.5% |
11.8% |
20.0% |
| Charlotte, NC |
$ 54,583 |
$ 147,200 |
38.7% |
12.7% |
19.2% |
| Austin, TX |
$ 60,225 |
$ 200,700 |
37.8% |
15.5% |
24.3% |
| Virginia Beach, VA |
$ 51,985 |
$ 205,800 |
48.1% |
18.7% |
20.8% |
About Zillow:
Zillow, Inc. (NASDAQ: Z) operates the largest home-related marketplaces on mobile and the Web, with a complementary portfolio of brands and products that help people find vital information about homes, and connect with the best local professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Stan Humphries. Dr. Humphries and his team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. The Zillow, Inc. portfolio includes Zillow.com®, Zillow Mobile, Zillow Mortgage Marketplace, Zillow Rentals, Zillow Digs®, Postlets®, Diverse Solutions®, Agentfolio®, Mortech®, HotPads™ and StreetEasy®. The company is headquartered in Seattle.
Zillow.com, Zillow, Postlets, Mortech, Diverse Solutions, StreetEasy, Agentfolio and Digs are registered trademarks of Zillow, Inc. HotPads is a trademark of Zillow, Inc.
[i] Assuming a 20 percent down payment and a 30-year, fixed rate mortgage at a prevailing rate of 4.3 percent, the average of October, November and December mortgage rate data from Freddie Mac's Primary Mortgage Market Survey.
[ii] According to an analysis of homes listed for sale on Zillow as of February 28, 2014. The count of for-sale listings includes only single-family homes, condos and cop-ops.
SOURCE Zillow, Inc.
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