Lower affordability affects amount Americans have for expenses: Zillow

Register now

Home purchaser affordability declined in the fourth quarter, which also negatively affects the amount Americans have to spend on cost-of-living expenses, a report from Zillow said.

The mortgage payment on a typical home in the U.S. required 17.5% of the borrower's median income in the fourth quarter. This is up from 15.4% one year prior, but still below the historic average of 21% from the late 1980s and 1990s.

"In our quest for happiness, or at least satisfaction, we must accept tradeoffs," Skylar Olsen, Zillow's director of economic research, said in a press release. "A good-paying job with career growth potential often comes with expensive housing, leaving less for life's other essentials such as taxes, child care, transportation, medical services, food and leisure. Finding that balance where housing costs leave a comfortable amount of spending money is tricky, especially when the prices of life's nonhousing essentials also vary widely by market."

However, with falling rates and slowing price appreciation, home affordability, along with income remaining after the mortgage payment, should improve in the coming months.

In its analysis, Zillow subtracted the median mortgage payment from the median income payment in a given metro area.

Among the 35 metro areas analyzed by Zillow, the five least affordable for homebuyers were in California: San Jose, where 49.9% of the median income is needed to afford the median mortgage payment; San Francisco, at 44.2%; Los Angeles-Long Beach-Anaheim, 43.7%; San Diego, 36.4%; and Sacramento, 28.3%.

In Los Angeles, the situation is worse for renters, where 45.7% of income is needed for the median rental payment. Miami-Fort Lauderdale was the next most expensive area for renters, at 40.2%, but the percentage of income needed for the median mortgage payment was much lower, at 24.7%.

At the other end of the scale, the median income needed to afford the median mortgage payment in Pittsburgh was 11.6%, followed by 12.8% for St. Louis and 12.9% in both Detroit and Cincinnati.

For reprint and licensing requests for this article, click here.
Housing affordability Home prices Housing market Purchase Mortgage rates Zillow