SEATTLE (8/17/15)--The cost of rent--currently capturing 30% of consumers’ income in most major metropolitan areas--is reaching a historical high, according to 2Q numbers from Zillow.
Housing burden of 30% or less is generally considered an affordable proportion of income. Between 1995 and 2000, renters on average spent roughly a quarter of their incomes on rents (WSJ.com Aug. 13).
The number is significant in part because it shows rental burdens creeping past 30%, which economists consider an affordable proportion of income for people to pay on rent.
"Our research found that unaffordable rents are making it hard for people to save for a down payment and retirement, and that people whose rent is unaffordable are more likely to skip out on their own healthcare," said Zillow Chief Economist Svenja Gudell. "From an affordability perspective, rents are crazy right now. If you can possibly come up with a down payment, then it's a good time to buy a home and start putting your money toward a mortgage."
Home buyers are in a good position--they can expect to pay 15% of their income on mortgage payments, still less than the 21.3% from 1985 to 2000.
Rental affordability worsened year-over-year in 28 of the 35 largest metro areas surveyed by Zillow. In San Jose, Calif., renters and buyers should assign roughly 42% of their incomes toward housing. Affordability also worsened in metro areas that already were pricey--renters in New York now pay 41% compared with the historical amount of 25% of their incomes.