SEATTLE, July 10, 2019 /PRNewswire/ -- Households including at least one person with a high school diploma or GED can afford the typical mortgage payment in most large metro areas across the U.S.i, according to a new analysis by Zillow®. But soaring home values that have outpaced incomes have made down payments a barrier for many, particularly first-time home buyers.
Mortgage rates have dipped to multi-year lows in recent months, meaning monthly payments are relatively affordable for buyers who can secure a down payment. However, down payments are a challenge to afford for many as prices have grown faster than incomes over the past several years. A recent Zillow analysis found that buyers need 1.5 years longer to save for a 20% down payment on the typical home than 30 years prior, and the difference is much more extreme in the most expensive metros – 13.3 years longer in San Jose, for example.
This effect is especially pronounced for first-time buyers who do not have the equity of an existing home to put towards a down payment on a new one. Zillow data shows that 46% of a typical down payment comes from savings for first-time buyers, compared with 35% for repeat buyersii.
"The influx of highly educated workers into already-expensive metros with stagnant or slow-growing inventory has made it difficult for those with less education and earning potential to enter those markets," said Skylar Olsen, director of economic research at Zillow. "There can also be considerable variation within metros. While a bachelor's degree may be enough to afford a mortgage on the typical home in the San Diego metro at large, it's likely to be insufficient in pricey areas like La Jolla. And that's only after scraping together a sizable down payment, which is a huge hurdle for most buyers."
For households that secure a down payment, the median mortgage payments are affordable for those with a high school education in 36 of the 50 largest U.S. metros. The remaining 14 metros require earnings associated with at least a two-year associate's degree.
The median income of a university degree holder is necessary to afford the median mortgage payment in the five most expensive West Coast metros. A bachelor's degree is typically needed in San Diego and Seattle, while the typical income of someone with an advanced degree is required in San Jose, San Francisco and Los Angeles. The typical mortgage payment is affordable for those with associate's degrees in Boston, New York, Sacramento, Washington, D.C., Denver, Portland, Riverside, Salt Lake City and Miami.
In only one metro, Oklahoma City, can those with less than a high school degree usually afford the typical mortgage payment. Households in Oklahoma City benefit from a combination of low housing costs – only three of the 50 largest metros have a lower median mortgage payment – and relatively high median incomes for households in which nobody has a high school diploma.
Median rent was 27.8% of the typical U.S. household income in Q1 2019. This is up slightly from the previous quarter and just below levels from a year earlier. Rent was most affordable for those in Pittsburgh, where the median rent is 21.4% of the typical household income. Los Angeles is the least affordable large metro for renters – 46.1% of the typical income is required to pay the median rent there.
Metropolitan Area
| Median Monthly
Mortgage Payment
– Q1 2019
| Minimum
Education Needed
to Afford
| % Income Spent on
Median Mortgage
| % Income Spent
on Median Rent
|
New York, NY
| $1,741.57
| Associate's Degree
| 26.1%
| 36.3%
|
Los Angeles-Long
Beach-Anaheim, CA
| $2,569.80
| Advanced Degree
| 41.8%
| 46.1%
|
Chicago, IL
| $891.27
| HS Diploma or GED
| 14.9%
| 28.2%
|
Dallas-Fort Worth, TX
| $965.74
| HS Diploma or GED
| 16.4%
| 28.0%
|
Philadelphia, PA
| $922.80
| HS Diploma or GED
| 15.4%
| 26.8%
|
Houston, TX
| $814.05
| HS Diploma or GED
| 14.8%
| 28.7%
|
Washington, DC
| $1,608.79
| Associate's Degree
| 18.6%
| 25.1%
|
Miami-Fort
Lauderdale, FL
| $1,122.56
| Associate's Degree
| 23.8%
| 40.7%
|
Atlanta, GA
| $866.84
| HS Diploma or GED
| 15.3%
| 25.5%
|
Boston, MA
| $1,844.41
| Associate's Degree
| 24.4%
| 31.7%
|
San Francisco, CA
| $3,741.22
| Advanced Degree
| 41.6%
| 38.3%
|
Detroit, MI
| $639.10
| HS Diploma or GED
| 12.5%
| 24.0%
|
Riverside, CA
| $1,454.72
| Associate's Degree
| 26.6%
| 36.4%
|
Phoenix, AZ
| $1,050.06
| HS Diploma or GED
| 19.4%
| 26.7%
|
Seattle, WA
| $1,937.79
| Bachelor's Degree
| 26.9%
| 31.0%
|
Minneapolis-St Paul,
MN
| $1,065.04
| HS Diploma or GED
| 15.9%
| 25.4%
|
San Diego, CA
| $2,325.11
| Bachelor's Degree
| 34.5%
| 39.3%
|
St. Louis, MO
| $658.41
| HS Diploma or GED
| 12.2%
| 21.5%
|
Tampa, FL
| $844.39
| HS Diploma or GED
| 18.7%
| 31.9%
|
Baltimore, MD
| $1,060.31
| HS Diploma or GED
| 15.9%
| 26.3%
|
Denver, CO
| $1,607.60
| Associate's Degree
| 23.9%
| 31.3%
|
Pittsburgh, PA
| $568.97
| HS Diploma or GED
| 11.1%
| 21.4%
|
Portland, OR
| $1,567.81
| Associate's Degree
| 24.7%
| 29.5%
|
Charlotte, NC
| $821.93
| HS Diploma or GED
| 15.5%
| 25.2%
|
Sacramento, CA
| $1,623.76
| Associate's Degree
| 27.3%
| 32.2%
|
San Antonio, TX
| $766.37
| HS Diploma or GED
| 15.7%
| 28.0%
|
Orlando, FL
| $940.13
| HS Diploma or GED
| 19.7%
| 32.1%
|
Cincinnati, OH
| $673.38
| HS Diploma or GED
| 12.5%
| 24.2%
|
Cleveland, OH
| $578.82
| HS Diploma or GED
| 12.7%
| 25.6%
|
Kansas City, MO
| $762.82
| HS Diploma or GED
| 13.8%
| 23.4%
|
Las Vegas, NV
| $1,105.62
| HS Diploma or GED
| 22.0%
| 27.8%
|
Columbus, OH
| $758.88
| HS Diploma or GED
| 13.6%
| 24.4%
|
Indianapolis, IN
| $658.01
| HS Diploma or GED
| 12.7%
| 23.8%
|
San Jose, CA
| $4,766.46
| Advanced Degree
| 45.8%
| 34.2%
|
Austin, TX
| $1,230.13
| HS Diploma or GED
| 19.2%
| 26.6%
|
Virginia Beach, VA
| $907.03
| HS Diploma or GED
| 16.3%
| 26.0%
|
Nashville, TN
| $1,010.27
| HS Diploma or GED
| 18.1%
| 27.3%
|
Providence, RI
| $1,162.75
| HS Diploma or GED
| 20.1%
| 29.3%
|
Milwaukee, WI
| $917.67
| HS Diploma or GED
| 17.7%
| 25.8%
|
Jacksonville, FL
| $845.96
| HS Diploma or GED
| 16.7%
| 27.5%
|
Memphis, TN
| $552.02
| HS Diploma or GED
| 12.5%
| 25.5%
|
Oklahoma City, OK
| $578.42
| No HS Diploma
| 11.8%
| 22.5%
|
Louisville-Jefferson
County, KY
| $638.71
| HS Diploma or GED
| 12.8%
| 24.0%
|
Hartford, CT
| $905.46
| HS Diploma or GED
| 14.6%
| 25.9%
|
Richmond, VA
| $905.85
| HS Diploma or GED
| 15.4%
| 24.2%
|
New Orleans, LA
| $688.75
| HS Diploma or GED
| 15.8%
| 32.7%
|
Buffalo, NY
| $630.83
| HS Diploma or GED
| 12.9%
| 25.0%
|
Raleigh, NC
| $1,049.28
| HS Diploma or GED
| 16.7%
| 23.2%
|
Birmingham, AL
| $575.66
| HS Diploma or GED
| 12.6%
| 24.1%
|
Salt Lake City, UT
| $1,436.99
| Associate's Degree
| 22.9%
| 25.8%
|
Zillow
Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with great real estate professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow Group's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists, data analysts, applied scientists and engineers 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. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
i Mortgage payments were considered affordable if the median mortgage payment in a given metro was no more than 30% of the median household income for a given level of education in that metro. This analysis cites household incomes from the 2017 American Community Survey, inflation-adjusted to 2019 dollars.
ii 2018 Zillow Group Consumer Housing Trends Report
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SOURCE Zillow