Mortgage Affordability Report Paints Picture of Two Extremes

Detroit is predicted to be the most affordable and San Francisco the least affordable housing market this year, according to the first-ever realtor.com® Mortgage Affordability Report released today.

Palm Coast, FL – March 24, 2015 – With home prices and interest rates likely to increase and mortgage affordability likely to decrease, Detroit is predicted to be the most affordable and San Francisco the least affordable housing market this year, according to the first-ever realtor.com® Mortgage Affordability Report released today. The report from realtor.com®, a leading provider of online real estate services operated by Move, Inc., a subsidiary of News Corp [Nasdaq: NWS, NWSA], pulls data from the 25 largest housing markets in the United States and provides a glimpse into affordability on a national level as the spring housing season gets underway.

"Over the last 10 years, we have seen marketplace gyrations ranging from bubble to burst to recovery to stabilization, and we are now seeing a market of extremes on the affordability front," said Jonathan Smoke, chief economist for realtor.com®. "Buyers – especially first-time home buyers – might feel more motivated as the overall market continues to improve, and this report provides potential buyers with local insight that is both informative and instructive."

Of the most affordable markets, Detroit is No. 1 on the list with 30-year fixed-rate mortgage (FRM) purchases forecasted to annually require 13.2 percent of median income, which is way below the mortgage qualification threshold of 28 percent. The predicted rent-to-income ratio is higher at 26 percent. All five of the most affordable markets are below the 28 percent mortgage-to-income ratio threshold.

The report found that in the San Francisco and San Diego markets, the expected mortgage-to-income ratio by year-end is more than double the 28 percent of income threshold with San Francisco requiring 72 percent of median income. Additionally, renters in the five least affordable markets spent a high percentage of their income on rent in 2014 and will again in 2015, although rent is not expected to grow as fast as incomes in each market. San Francisco has the highest forecasted rent-to-income ratio with 40.9 percent.

Nationally, by the end of 2015, the report found that the median household income of $55,533 will spend 27.6 percent of income annually on a median priced home purchased with a 30-year FRM. Rent is predicted to require 29.5 percent of income.

National Key Affordability Indicators

Median Income (2015)

Mortgage-to-income Ratio (2015)

Mortgage-to-income

Ratio (2014)

Change YOY

Rent-to-income (2015)

Rent-to-income (2014)

Change YOY

$55,533

27.6%

26.3%

1.3%

29.5%

30.4%

-0.9%

Most Affordable Markets
(Ranked by lowest 2015 predicted mortgage-to-income ratio with a 30-year FRM)

Markets

Median Income (2015)

Mortgage-to-income Ratio (2015)

Mortgage-to-income

Ratio (2014)

Change YOY

Rent-to-income (2015)

Rent-to-income (2014)

Change YOY

Detroit-Warren-Dearborn, MI

$53,186

13.2%

12.4%

0.8%

26.0%

27.4%

-1.4%

St. Louis, MO-IL

$57,255

18.1%

17.5%

0.6%

22.0%

22.9%

-0.9%

Cleveland-Elyria, OH

$49,965

18.8%

17.8%

1.0%

24.6%

25.4%

-0.8%

Atlanta-Sandy Springs-Roswell, GA

$56,557

19.8%

18.9%

0.9%

24.8%

25.6%

-0.8%

Pittsburgh, PA

$54,264

20.1%

19.1%

1.0%

21.1%

21.6%

-0.5%

Least Affordable Markets
(Ranked by highest 2015 predicted mortgage-to-income ratio with a 30-year FRM)

Markets

Median Income (2015)

Mortgage-to-income Ratio (2015)

Mortgage- to-income

Ratio (2014)

Change YOY

Rent-to-income (2015)

Rent-to-income (2014)

Change YOY

San Francisco-Oakland-Hayward, CA

$78,355

72.0%

64.7%

7.3%

40.9%

41.7%

-0.8%

San Diego-Carlsbad, CA

$64,392

56.9%

53.0%

3.9%

35.4%

36.6%

-1.2%

Los Angeles-Long Beach-Anaheim, CA

$62,037

50.7%

48.5%

2.2%

38.0%

39.3%

-1.3%

New York-Newark-Jersey City, NY-NJ-PA

$67,968

46.6%

44.2%

2.4%

31.8%

32.1%

-0.3%

Miami-Fort Lauderdale-West Palm Beach, FL

$49,121

42.2%

40.7%

1.5%

40.1%

42.1%

-2.0%

"Affordability is greatly impacted by mortgage rate, so waiting a year to buy as affordability declines may force home buyers to consider alternative options such as hybrid-adjustable mortgages that have lower rates," Smoke said. "Many first-time buyers are also challenged by having the funds for a down payment. While there are low down payment mortgage options, a disadvantage of a low down payment is higher monthly payments. The cost of owning varies across the country, but there are major cities where owning an averaged priced home is within reach of the median income household."

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