A bigger piece of the pie.
The average homeowner is forking over 17.1 percent of their income for their mortgage, an allocation that has grown from 15.9 percent in 2017, according to a recent report by Zillow. The increase is the second-most significant since the recession. Why the jump?
“For the past few years, historically low mortgage rates provided the silver lining for buyers as prices rose higher and higher,” says Aaron Terrazas, senior economist at Zillow. “If you were able to come up with a down payment, the low rates kept monthly housing costs relatively affordable in most parts of the country. Now, though, as rates are on the rise and home values are climbing at their fastest pace in 12 years, that affordability edge is getting thinner.”
The average 30-year, fixed mortgage rate has risen sharply this year, now at approximately 4.6 percent, according to Freddie Mac. For the bulk of 2017, mortgage rates held below 4 percent. Additionally, appreciation and incomes have not increased at matching rates; according to Zillow, in the first quarter of 2018, the average home was 3.54 times more than the average income.
“In markets that have seen some of the biggest increases in home values, housing costs already take up a larger share of income than they did historically, making it all the more difficult for buyers,” Terrazas says.
For more information, please visit www.zillow.com.