Buying a home is currently two times more affordable than renting one, and the divide is only growing, a new report from Zillow concludes.
The study compared average affordability between 1985 and 2000, when buyers were paying about 22 percent of their income into their mortgage and a little more — 25 percent — into renting, with today’s affordability. Now, home owners are devoting about 15 percent of their income to their mortgage, while renters pay upwards of 30 percent towards the monthly rent. The advantage in favor of buying comes thanks to low interest rates and post-recession home prices, according to Stan Humphries, Zillow’s chief economist, who wrote about the report on Twitter.
Even potential buyers who would have to pay mortgage insurance and can’t pony up a large down payment would find it more affordable to purchase, according to the report, which took into account data from the third quarter of 2014. Renting has become historically unaffordable in California and all of the 35 biggest metros, Zillow noted.
The District follows this same pattern. In DC, renters are on average paying 27 percent of their monthly income into housing, up from an average of 16 percent between 1985 and 2000. Homeowners, on the other hand, are spending about 18 percent of their income on housing, down from 22 percent between 1985 and 2000. And first-time homebuyers, those whose home owning costs likely outpace long-time owners with more equity, are paying 24 percent of their income into housing — still less than a renter, according to a HousingWire analysis of Zillow’s data.
Humphries predicts that the discrepancy will continue to widen into next year.
“Affordability will force more renters to consider buying, especially younger renters,” he wrote on Twitter. “2015: Millennials become biggest buying group.”
This article originally published at http://dc.urbanturf.com/articles/blog/renting_is_twice_as_expensive_as_buying_zillow_says/9312
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