Research reveals mortgage payments are unaffordable on half of large markets in US

Mortgage payments are unaffordable in half of America’s largest housing markets as prices have risen so much, the latest research shows.

The median price of homes for sale is higher than the median home value of all homes in all but three of the largest 35 metros, according to the latest report from real estate firm Zillow.

For example, homes for sale in the six largest California metros have unaffordable mortgage payments and overall, mortgage payments on the median home for sale require 20% of the median income.

However, in Los Angeles monthly mortgage payments on for sale homes require 46.8% of the median income. In the years leading up to the housing bubble, Los Angeles home buyers would have had to spend 35.2% of their income on mortgage payments for the typical home.

Cleveland homes for sale are more affordable than homes were historically. The median list price of about $144,000 would require 12.7% of the median income for monthly mortgage payments. In pre-bubble years, paying the mortgage on the typical Cleveland home required 20% of the median income.

The report suggests that one reason this home shopping season is so difficult for buyers is that the homes available for sale are generally more expensive than the median home value of all homes in the same market.

As home prices recovered and surpassed the peak values reached during the housing bubble, concerns about housing affordability also returned, despite low mortgage rates keeping monthly payments relatively affordable.

It also points out that the large down payments that come with high prices are a significant barrier to home ownership, and the monthly payments are taking up a larger share of income as well.

‘Homes have gotten so expensive in many major cities that even with low mortgage rates, monthly costs for homes that are currently for sale are starting to be unaffordable, said Zillow chief economist Svenja Gudell.

‘Down payments are a top concern for today’s home buyers, but the reality is that monthly costs are becoming unaffordable as well. Low inventory is pushing sticker prices higher, and when mortgage rates start to rise, monthly payments will be driven further into unaffordable territory,’ she added.