The share of income required to purchase a home is on the rise, with monthly mortgage payments during the fourth quarter of 2016 taking the largest cut of monthly earnings since the second quarter of 2010, according to Zillow.
Typical monthly mortgage payments required 15.8% of median household income during the period, compared to 14.7% a year ago. Those payments are up by $68 per month from 2015, with the majority of that increase ($47) credited to home-value appreciation and the rest to higher mortgage rates. Monthly rents dipped to 29.2% of the median household income during the period from 29.4% a year earlier.
- Los Angeles topped the list of U.S. metros requiring the biggest share of income from homebuyers and renters at 43% and 48.5%, respectively, while San Francisco was close behind at 42.2% and 43.8%, respectively.
Mortgage rates have trended higher since the general election in November. The National Association of Home Builders reported that mortgage rates on newly constructed homes posted a 19-basis-point rise in December.
Those increases, coupled with the general rise in home prices, is fueling concern that growth in the housing sector could be dampened this year, particularly at the lower-end of the market where potential buyers are more sensitive to price changes.
The share of homebuyers under the age of 35 dipped slightly to 34.7% in the fourth quarter from 35.2% in the third quarter, according to the latest homeownership data from the U.S. Census Bureau. Still, the period saw a larger share of households owning than those renting, a sign of continued recovery in the market.
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