A December 8th report from Zillow Real Estate Research highlights two trends in the U.S. residential real estate market: rising rents and homes being relatively affordable to buy. The data about homes being relatively affordable to buy comes with a big caveat, however, in that it doesn’t apply to any major California city or many other major metropolitan areas in the U.S (including NYC, Boston, Seattle, Portland and Austin). That said, if you’re looking for a home in smaller city or almost anywhere in the Midwest, you should be able to find an affordable home.
Rising rents: Homebuyers nationwide still in the catbird seat
Zillow’s 2014 Q3 Affordability Index makes it clear that homebuyers and renters continued to face very different affordability situations.
Einhorn’s FOF Re-positions Portfolio, Makes New Seed Investment In Year Marked By “Speculative Exuberance”
It has not just been rough year for David Einhorn's own fund. Einhorn's Greenlight Masters fund of hedge funds was down 3% net for the first half of 2020, matching the S&P 500's return for those six months. In his August letter to investors, which was reviewed by ValueWalk, the Greenlight Masters team noted that Read More
Homes remain very affordable to buy relative to historic norms nationwide, with the median buyer purchasing the median-priced home (with a 20% down payment and prevailing mortgage rates) having to spend around 15% of their income on a mortgage payment. Historically, buyers have had to put close to 22% of their incomes into a mortgage.
Buying a home is more affordable today than it was in the for all age groups pre-bubble period from 1985 to 1999. First-time millennial (age 23-34) buyers should anticipate paying around 17.4% of their income into their home, relative to 22.5% historically.
Of note, homes were more affordable for typical buyers in the third quarter than historically in a majority of markets analyzed. That said, there were a number of important exceptions. Large cities where homes were less affordable in the third quarter (ie, homes cost higher percentage of income) compared to the historic average include the California cities of Los Angeles, San Francisco, San Diego and San Jose, as well as Austin, Texas.
The Zillow report highlights that renters, unlike homebuyers, continued to struggle in the third quarter due to rising rents. Renters bringing home the national median income and renting the median-priced apartment will pay around 30% of their income in rent, relative to 25% historically. Among the largest 35 metros areas, Miami, San Francisco, New York, San Jose and Los Angeles are suffering from the greatest differences between current and historic rent affordability.