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Renters Can Buy Without Increasing Their Monthly Housing Costs

Median rent is more expensive than the mortgage payment on a median valued home in the U.S., but many renters are struggling to come up with a down payment

Apr 28, 2017

SEATTLE, April 28, 2017 /PRNewswire/ -- Rent is so high that a typical renter in the U.S. can purchase a home nearly 50 percent more expensive than the median valued home and keep the same monthly housing budget, according to a new Zillow® analysis.

The median rent in the U.S. is $1,416 per month, which is enough to cover the monthly expenses associated with owning a $289,505 home. The median U.S. home value is $196,500.

Rent is more expensive than ever before. Affordability is a growing concern across the country, and rent requires almost half of the median income in some of the nation's most expensive markets. A mortgage payment is cheaper than a rental payment on a monthly basis, but saving enough money for the down payment is holding back many renters from crossing over into homeownership.

Zillow analyzed the median rent payment in cities across the country to determine how much home a prospective buyer could afford without spending more on a mortgage than they were currently spending on rent. Zillow factored in all monthly homeownership costs, such as property taxes, maintenance and insurancei. In 37 of the 50 cities Zillow analyzed, renters could buy a home worth more than the median valued home in their city without spending more on monthly housing costs.

Renters paying the median rent in Cleveland and Milwaukee can afford to buy a home more than twice as expensive as the local median home value. In Cleveland, prospective buyers can buy a home valued at $174,194 while keeping all monthly housing costs the same -- this represents more than 80 percent of homes currently on the market.

San Francisco is one of the only cities in the country where a monthly rental payment would not cover the costs of owning the median valued home. Renters in San Francisco who want to keep monthly expenses the same would have to buy a home valued at $865,857, representing just 23 percent of homes currently on the market. The median home value in the city of San Francisco is over $1 million.

"Renters hesitant to enter the home buying market for fear of not being able to find an affordable home should be encouraged to discover they may have more options than they thought," said Zillow Chief Economist Dr. Svenja Gudell. "However, it's worth noting that many of the more affordable homes for sale may be older, smaller and/or located in less-desirable neighborhoods than they might like. The decision between buying and renting is a financial trade-off between saving more each month on a mortgage payment versus spending more on rent but taking advantage of the location and lifestyle amenities urban renting often offers. Recent slowdowns in rent growth may take some of the edge off for renters saving to become homeowners. This is good news, since saving a down payment, qualifying for a loan and finding a home available at a manageable price remain hurdles for millions of aspiring buyers."

Nearly half of all buyers are entering the market for the first-time, according to the 2016 Zillow Group Report on Consumer Housing Trends. The majority of all buyers stay within the same city when they move.

City

 Zillow Rent
Indexii (ZRI),
March 2017

 Zillow Home
Value Indexiii
(ZHVI), March
2017

 Value of Home
Affordable without
Increasing Monthly
Housing Costs

Share of
Available
Inventory

United States

$1,416

$196,500

$289,505

56.8%

New York, NY

$2,372

$650,000

$484,962

28.7%

Los Angeles, CA

$2,863

$622,900

$585,348

27.6%

Chicago, IL

$1,650

$220,900

$337,347

57.1%

Philadelphia, PA

$1,218

$136,100

$249,023

71.9%

Phoenix, AZ

$1,256

$208,600

$256,793

40.6%

Las Vegas, NV

$1,245

$212,500

$254,544

47.5%

San Diego, CA

$2,503

$558,600

$511,745

31.3%

Dallas, TX

$1,393

$163,200

$284,803

24.7%

San Jose, CA

$3,310

$862,800

$676,739

28.3%

Jacksonville, FL

$1,171

$148,400

$239,414

59.1%

San Francisco, CA

$4,235

$1,167,200

$865,857

22.8%

Austin, TX

$1,848

$316,800

$377,829

33.2%

Detroit, MI

$751

$  39,100

$153,544

92.2%

Columbus, OH

$1,150

$127,400

$235,121

71.2%

Memphis, TN

$851

$  80,200

$173,989

73.5%

Charlotte, NC

$1,309

$181,200

$267,629

37.9%

El Paso, TX

$998

$113,800

$204,044

64.5%

Boston, MA

$2,634

$542,100

$538,529

23.4%

Seattle, WA

$2,540

$638,100

$519,310

26.5%

Baltimore, MD

$1,301

$124,100

$265,993

79.2%

Denver, CO

$2,000

$377,500

$408,906

31.2%

Washington, DC

$2,635

$559,200

$538,733

45.3%

Nashville, TN

$1,550

$223,800

$316,902

38.8%

Milwaukee, WI

$1,138

$105,700

$232,667

86.0%

Tucson, AZ

$1,080

$162,000

$220,809

48.1%

Portland, OR

$1,895

$414,800

$387,438

31.3%

Omaha, NE

$1,308

$151,700

$267,424

49.4%

Albuquerque, NM

$1,205

$187,500

$246,366

56.8%

Fresno, CA

$1,256

$209,600

$256,793

55.6%

Sacramento, CA

$1,543

$293,600

$315,471

60.5%

Mesa, AZ

$1,289

$219,100

$263,540

47.2%

Long Beach, CA

$2,459

$548,400

$502,749

46.7%

Kansas City, MO

$1,042

$119,400

$213,040

53.6%

Virginia Beach, VA

$1,562

$255,900

$319,355

57.2%

Colorado Springs, CO

$1,425

$246,800

$291,345

32.2%

Atlanta, GA

$1,510

$206,800

$308,724

46.6%

Miami, FL

$2,093

$299,900

$427,920

45.4%

Oakland, CA

$2,973

$676,900

$607,838

52.8%

Cleveland, OH

$852

$  56,300

$174,194

81.9%

Honolulu, HI

$2,438

$671,800

$498,456

36.5%

Minneapolis, MN

$1,617

$231,200

$330,600

50.3%

Baton Rouge, LA

$1,342

$155,800

$274,376

60.3%

New Orleans, LA

$1,377

$173,800

$281,531

47.0%

Arlington, TX

$1,465

$176,000

$299,523

57.0%

Raleigh, NC

$1,400

$221,000

$286,234

28.0%

Wichita, KS

$947

$121,000

$193,617

57.7%

Tampa, FL

$1,347

$182,700

$275,398

46.3%

Anaheim, CA

$2,642

$560,200

$540,164

31.7%

Santa Ana, CA

$2,490

$493,900

$509,087

42.0%

Aurora, CO

$1,783

$281,000

$364,539

56.0%

Zillow

Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ:Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

________________________________
i This analysis assumes a 20% down payment, and property taxes of 1% of the home value annually, maintenance costs of 1% of the home value annually, and homeowners' insurance of 0.5% each year.
ii The Zillow Rent Index (ZRI) is the median Rent Zestimate® (estimated monthly rental price) for a given geographic area on a given day, and includes the value of all single-family residences, condominiums, cooperatives and apartments in Zillow's database, regardless of whether they are currently listed for rent. It is expressed in dollars. 
iii The Zillow Home Value Index (ZHVI) is the median estimated home value for a given geographic area on a given day and includes the value of all single-family residences, condominiums and cooperatives, regardless of whether they sold within a given period. It is expressed in dollars, and seasonally adjusted.

 

SOURCE Zillow, Inc.

For further information: Jordyn Lee, Zillow, press@zillow.com


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