New research from Zillow suggests that “Rising Rents Impact Rental Affordability & Pose Challenges to Homeownership, Too.” As Meredith Miller reports, “rental affordability is worse currently compared to historic norms in all but one of the 35 largest metros, making it difficult for renters to save money for a down payment.” Given the disproportionate increase of average rental prices and income growth, “the share of income needed to afford median rents rose in 28 of the 35 largest U.S. metros over the past year” which means that “renters’ money that could be going into the piggy bank for a future down payment is instead going into landlords’ pockets.”
King 5 News also reported on the numbers, as a video feature describes that Americans nationwide are spending an average of 15% on mortgages and double that number on rent. Yet in the Emerald City, these statistics are elevated even further, as Seattleites typically pay 22% of their income toward a mortgage and 32% toward rent. Given average home prices in the area, King 5 says that a typical 20% down payment would require nearly $72,000 versus a national average around $36,000. Yet that figure is nearly impossible to save for, as rent has far outpaced income growth.
Melissa Allison, writer for the Zillow Blog also made some observations given the recent statistics, describing “The Down Payment Quandary: Trying to Save 20 Percent.” As the article describes, “the crimp that high rents are putting in people’s budgets has a direct impact on how able they are to save for a down payment.” Paying less than 20% requires mortgage insurance, but as Allison notes, “even with mortgage insurance tacked on, people tend to have lower monthly payments for mortgages than for rent.” So how are people making hefty down payments work? “Assistance from parents remains a common way to get a foot in the door of your own home.”