Buying now is twice as affordable as renting, but that doesn’t mean it’s any easier for young buyers to get into the market
As it’s gotten more affordable to own a home, the exact opposite has taken hold for renters.
American homebuyers making the national median income and purchasing the typical U.S. home spend just more than 15 percent of their income on their monthly housing payment, down from a historical norm of around 22 percent during the pre-bubble years between 1985 and 1999, according to a Zillow analysis of third-quarter 2014 income and home-value data.
Renters, on the other hand, now spend nearly 30 percent of their monthly income on rent, up from around 25 percent historically.
Rents are expected to grow around 3.5 percent in 2015, according to Zillow. But while the increase in monthly costs may drive some renters toward the buying market, according to Dr. Stan Humphries, Zillow’s chief economist, it also may make it more difficult for first-time buyers to save for a down payment. Younger buyers – often earning less and making smaller down payments, should expect to spend slightly more (17.4 percent vs. 15.3 percent) on their mortgage payments. Continued low mortgage rates and increasing inventory should see more young buyers enter the market in the coming year.
“Roughly 42 percent of millennials say they want to buy a home in the next one to five years, compared to just 31 percent of Generation X,” Zillow’s Humpries said in a statement. “The lack of home-buying activity from millennials thus far is decidedly not because this generation isn’t interested in home ownership but instead because younger Americans have been delaying getting married and having children, two key drivers in the decision to buy that first home.”
by zillow
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