More than half of homes in major us markets unaffordable

Photo credit: Michael Patrick

More than half of the homes for sale in major US markets are unaffordable for the average buyer, according to new research from Zillow.

The statistics from Zillow reveal that, taking into account home values, average income and mortgage rates in the fourth quarter of 2013, more than half of homes for sale in the 35 largest metros are unaffordable.

62.4 percent of property for sale in Miami are too expensive for typical America buyers, followed by Los Angeles (57.2 percent), San Diego (55.3 percent), San Francisco (55.2 percent), Denver (52.8 percent), San Jose (50.9 percent) and Portland, Ore. (50.3 percent).

Homebuyers looking for affordable properties may increasingly be forced to search on the perimeter of the country's largest metro markets, as downtown properties become out of reach.

(Zillow's analysis compares the current percentage of an area's median income needed to afford the monthly mortgage payment on a median-priced home with the percentage required between 1985 and 2000. If the share is greater now than in the pre-bubble years, the home is considered unaffordable.)

Across the whole nation, though, just one-third of homes are currently unaffordable, with the majority of homes more affordable now than they have been historically. But as mortgage interest rates and house prices both increase, affordability is expected to worsen.

"We're not in a bubble yet," said Zillow Chief Economist Dr. Stan Humphries, "but we're beginning to see the early signs of one in some areas."

"As affordability worsens, we're already beginning to see more of the kinds of worrisome trends we saw en masse during the years leading up to the housing crash. These include a greater reliance on non-traditional home financing, smaller down payments and a greater pressure to move further away from urban job centres."