It’s more affordable to buy a home now in most U.S. metros than it was 15 years ago, even for millennials putting down less money on a home, according to a Zillow analysis of third-quarter income and home value data.
Renters, however, continue to pay an increasing share of their income to their landlords as rents soar and incomes remain flat.
On average, homebuyers making the nation’s median income and purchasing the typical U.S. home spend 15.3% of their income on their monthly house payment, down from the historical norm of 22.1% during the pre-bubble period from 1985 to 1999.
In contrast, renters spent 29.9% of their monthly income on rent in the third quarter of 2014, up from 24.9% historically.
Younger buyers, earning less money in many areas and making smaller down payments on a home, should expect to spend slightly more of their income on mortgage payments – 17.4%.
Homes for younger buyers remain affordable thanks to continued low mortgage interest rates and their tendency to shop for less expensive homes.
Continuously rising rents across the country could drive more people into the home-buying market, but they also make it more difficult for first-time buyers to save for a down payment. Washington, D.C., renters can expect to spend 27.1% of their income on rent, up from 16.2% historically. In Miami, rent as a percentage of income has risen from 26.5% before the bubble to 44.5% currently.