Housing affordability drops to 15-year low: Zillow

Rising prices, mortgage payments drive homebuyer metric to lowest on record

An illustration of sad homebuyers (iStock)

The aughts are back in style, with early-2000s inspiration trending in fashion, music and mortgage costs.

Housing affordability last month reached its lowest point since at least 2007, according to a recent report from Zillow. That’s as far back as the company’s affordability metric goes.

Housing prices continued their rise, though the growth acceleration finally showed signs of slowing last month. Meanwhile, mortgage rates and payments continue to balloon, while inventory is not recovering quickly enough to ease the supply-demand disparity.

Mortgage rates were flirting with the 6 percent mark last week, mere months after exceeding the 5 percent threshold. The rates are still historically low, but significantly higher than they were in the first couple of years of the pandemic.

As a result, mortgage payments are rocketing. At Thursday’s average rate of 5.78 percent, the mean monthly mortgage payment in the country would be $2,127, according to Zillow. That’s a 51 percent surge year-over-year and a 36 percent increase from the beginning of the year.

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In April, monthly mortgage payments took 28 percent of homeowners’ income; 30 percent is considered a cost burden.

There are small glimmers of hope for homebuyers. According to Zillow’s index, price growth in April was 20.9 percent versus 20.7 percent in May. Last month was the first in more than a year to feature a deceleration in price growth, according to Zillow; the S&P CoreLogic Case-Shiller Index for May won’t be out until late next month.

Inventory is also showing signs of recovery. Listings increased 10.5 percent from the previous month in April. Listings are still 14.2 percent below levels from the previous year, though, and 50 percent below the mark of May 2019.

Weary home buyers can’t exactly kick back and turn to the rental market. Rents are shooting up similarly to mortgage payments — May’s annual rent appreciation was 15.9 percent and the typical rent in the country was only a few cups of coffee shy of $2,000; Redfin reported that the benchmark was exceeded last month.

Despite rising rents, mortgage payments exceed monthly rent statements in all but five states. That’s a drastic change from 2019, when rent was higher than mortgage payments in a small majority of states.