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Housing affordability hits 15-year low as prices, mortgage rates rise

Housing affordability hits 15-year low as prices, mortgage rates rise


Demand wavers in some areas as housing costs mount

  • Mortgage payments are higher than rent in 45 of the 50 largest U.S. metros, up from 22 in 2019.
  • Price appreciation is finally starting to slow, easing slightly from 20.9% annual growth in April to 20.7% in May.
  • Inventory continues to recover from February lows, but is still 50% below 2019 levels.

SEATTLE, June 21, 2022 /PRNewswire/ — Ballooning mortgage costs, driven by skyrocketing prices and interest rates, have made mortgages less affordable than at any time since at least 2007. Demand for homes has pulled back in response, easing price growth, slowing sales and boosting inventory, according to the latest market report1 from Zillow®.

Mortgage rates have shot up in early June, averaging 5.78%2 as of Thursday. A new purchase of a typical U.S. home3 at that rate would mean monthly mortgage payments of $2,127, that’s 51% higher than a year ago and up 36% year to date.  

“Mortgage rates took an unprecedented leap skyward over the past two weeks and quickly multiplied housing costs as they rose,” said Zillow economist Nicole Bachaud. “We are already seeing signs of waning demand, and expect these recent rate hikes to quicken the market’s needed rebalancing. While shoppers will likely experience less competition for homes than the frenzied recent months, their purchasing power has dwindled.” 

Incomes are lagging further behind fast-rising mortgage costs, leading to the most significant affordability challenges in the past 15 years. The latest data available from April shows monthly payments4 taking about 28% of homeowners’ monthly income — dangerously close to the 30% threshold, beyond which is considered a cost burden. With rates now far above April’s average, that share is at or very near 30% already. Zillow data for this metric is available through 2007; the Atlanta Federal Reserve’s Home Ownership Affordability Monitor shows affordability bottoming out in July 2006. 

Although rents have soared since the start of 2021, the rapidly rising cost of a mortgage still makes rent the cheaper option nearly everywhere. A typical rent payment in May is more expensive than a mortgage payment (with a 20% down payment), including taxes and insurance, in just five of the 50 largest U.S. metros. In May 2019, rent was more expensive in 28 of those metros. 

After annual price appreciation set new record highs for 13 straight months, home values finally turned the corner in May to show a slightly slower pace of annual growth: 20.7%, down from 20.9% in April. 

“Arriving in the middle of the spring selling season, this deceleration is a clear signal that buyers are dialing back their demand for homes in the face of daunting affordability challenges,” said Jeff Tucker, senior economist at Zillow. 

The trend appears to show that the market passed an inflection point for home values between April and May, transitioning from ever hotter to somewhat cooler price growth. The typical U.S. home is now worth $349,816 — nearly $60,000 more than last year and almost $95,000 higher than in May 2020. 

Sales are also slowing. The number of for-sale listings that went under contract in May is down nearly 20% from 2021, when that activity was near a four-year peak, and is 2% below that of May 2019. The median time on market for new listings is just seven days — holding steady from April and even with last May.

Share of listings with a price cut is ticking up as well — rising to 11.5% in May from a recent low of 8.5% in February. 

Inventory of for-sale listings continued its steady spring climb and now sits just 14.2% below its year-ago level. Still, that leaves buyers with 50% fewer options than they had to choose from in May 2019. 

Typical rents are up to $1,979 in the U.S. and still rising fast, with 1.2% monthly growth that slightly edged April’s 1.1% month-over month rise. To put this into context, the average monthly May rent growth from 2014 to 2019 was 0.7%. Annual rent appreciation for May is 15.9%, easing off a peak of 17.2% in February. 

Metropolitan
Area*

Zillow
Home
Value
Index
(ZHVI)

ZHVI
Year-
Over-
Year
(YoY)
Change

Monthly
Mortgage
Payment
on a
Typical
Home**

Monthly
Mortgage
Payment
on a
Typical
Home
YoY
Change

Newly
Pending
Transactions
YoY
Change

Zillow
Observed
Rent
Index
(ZORI)

ZORI
YoY
Change

Share
of
listings
with
a
Price
Cut

United States

$349,816

20.7 %

$2,031

47.3 %

-19.6 %

$1,979

15.9 %

11.5 %

New York, NY

$609,114

13.0 %

$3,595

37.5 %

-23.6 %

$3,121

20.8 %

9.1 %

Los Angeles, CA

$948,029

20.6 %

$4,870

51.6 %

-23.9 %

$2,922

16.1 %

9.6 %

Chicago, IL

$309,940

14.6 %

$1,983

37.1 %

-20.1 %

$1,945

11.0 %

13.6 %

Dallas–Fort
Worth, TX

$390,505

30.3 %

$2,549

55.3 %

-5.7 %

$1,791

17.7 %

10.2 %

Philadelphia, PA

$332,772

13.5 %

$2,026

37.2 %

-20.6 %

$1,846

11.2 %

12.8 %

Houston, TX

$306,192

23.2 %

$2,032

46.4 %

-21.1 %

$1,575

11.7 %

13.4 %

Washington, DC

$554,922

10.2 %

$2,980

37.1 %

-21.9 %

$2,231

11.6 %

11.0 %

Miami–Fort
Lauderdale, FL

$445,739

30.0 %

$2,651

57.9 %

-32.7 %

$2,862

31.0 %

9.3 %

Atlanta, GA

$375,674

30.5 %

$2,111

60.5 %

-26.3 %

$1,938

16.7 %

12.4 %

Boston, MA

$659,089

15.0 %

$3,709

41.4 %

-25.8 %

$2,788

12.1 %

8.0 %

San Francisco,CA

$1,500,189

18.5 %

$7,702

49.0 %

-16.5 %

$3,214

10.3 %

8.3 %

Detroit, MI

$241,645

15.0 %

$1,491

38.6 %

-14.5 %

$1,423

11.3 %

11.7 %

Riverside, CA

$585,904

26.0 %

$3,202

56.0 %

-16.5 %

$2,613

15.9 %

12.6 %

Phoenix, AZ

$476,098

29.0 %

$2,487

61.6 %

-12.2 %

$1,937

19.1 %

13.3 %

Seattle, WA

$794,576

24.8 %

$4,269

55.2 %

-8.4 %

$2,265

15.5 %

10.0 %

Minneapolis
–St. Paul, MN

$377,615

12.3 %

$2,203

37.0 %

-18.8 %

$1,657

6.5 %

10.3 %

San Diego, CA

$936,472

26.2 %

$4,857

58.2 %

-18.0 %

$2,999

19.7 %

10.6 %

St. Louis, MO

$242,392

14.7 %

$1,468

38.7 %

-18.2 %

$1,281

11.3 %

9.5 %

Tampa, FL

$375,460

36.5 %

$2,233

65.8 %

-18.5 %

$2,089

25.2 %

12.9 %

Baltimore, MD

$374,947

11.1 %

$2,078

37.1 %

-18.0 %

$1,808

9.8 %

11.9 %

Denver, CO

$646,964

23.6 %

$3,394

54.5 %

-8.3 %

$1,988

14.2 %

11.2 %

Pittsburgh, PA

$212,781

11.8 %

$1,313

34.8 %

-16.8 %

$1,361

8.4 %

13.8 %

Portland, OR

$588,606

18.7 %

$3,222

46.8 %

-19.5 %

$1,873

12.5 %

12.6 %

Charlotte, NC

$380,090

31.1 %

$2,090

62.1 %

-25.5 %

$1,779

17.7 %

12.1 %

Sacramento, CA

$623,735

21.0 %

$3,341

50.6 %

-14.2 %

$2,281

10.1 %

14.9 %

San Antonio, TX

$335,423

25.4 %

$2,145

50.1 %

-25.0 %

$1,469

14.9 %

12.3 %

Orlando, FL

$386,180

33.4 %

$2,238

62.9 %

-20.5 %

$2,040

23.7 %

10.6 %

Cincinnati, OH

$259,655

16.0 %

$1,567

40.4 %

-16.6 %

$1,455

11.9 %

10.4 %

Cleveland, OH

$216,396

15.1 %

$1,390

37.7 %

-14.3 %

$1,370

11.0 %

10.3 %

Kansas City, MO

$285,599

15.6 %

$1,723

40.0 %

-18.8 %

$1,347

11.0 %

8.4 %

Las Vegas, NV

$446,534

32.4 %

$2,354

65.3 %

-16.7 %

$1,847

18.8 %

13.7 %

Columbus, OH

$295,211

16.7 %

$1,852

40.3 %

-13.8 %

$1,440

12.3 %

9.1 %

Indianapolis, IN

$266,890

20.3 %

$1,520

47.6 %

-11.5 %

$1,501

13.2 %

10.8 %

San Jose, CA

$1,706,565

22.4 %

$8,664

54.4 %

-20.8 %

$3,295

12.1 %

8.1 %

Austin, TX

$599,525

32.4 %

$3,724

59.4 %

-28.9 %

$1,869

18.7 %

9.6 %

Virginia
Beach, VA

$321,842

14.1 %

$1,774

41.0 %

-2.9 %

$1,607

11.0 %

7.7 %

Nashville, TN

$442,418

33.1 %

$2,400

65.2 %

-30.2 %

$1,840

18.4 %

12.5 %

Providence, RI

$444,314

16.3 %

$2,637

41.3 %

-27.3 %

$1,946

15.3 %

8.3 %

Milwaukee, WI

$271,326

11.8 %

$1,695

34.4 %

-19.6 %

$1,186

7.5 %

8.3 %

Jacksonville, FL

$363,998

33.1 %

$2,099

62.8 %

-25.7 %

$1,778

19.2 %

12.4 %

Memphis, TN

$228,061

20.6 %

$1,375

46.1 %

4.8 %

$1,536

12.6 %

9.5 %

Oklahoma
City, OK

$213,799

18.3 %

$1,308

42.8 %

-20.1 %

$1,335

11.9 %

10.6 %

Louisville, KY

$238,698

13.8 %

$1,356

39.6 %

-18.6 %

$1,279

11.4 %

13.0 %

Hartford, CT

$318,367

14.4 %

$2,055

36.7 %

-31.2 %

$1,628

11.1 %

8.3 %

Richmond, VA

$326,990

13.2 %

$1,759

40.7 %

-22.2 %

$1,591

12.8 %

6.8 %

New
Orleans, LA

$266,858

14.3 %

$1,552

39.5 %

-16.0 %

$1,522

16.0 %

16.0 %

Buffalo, NY

$246,213

17.7 %

$1,657

39.5 %

-10.4 %

$1,260

10.0 %

8.2 %

Raleigh, NC

$456,241

37.3 %

$2,494

69.9 %

-28.0 %

$1,742

16.9 %

9.3 %

Birmingham, AL

$237,845

17.8 %

$1,271

46.6 %

6.0 %

$1,343

11.0 %

10.8 %

Salt Lake
City, UT

$612,118

27.4 %

$3,183

59.7 %

-38.4 %

$1,712

17.3 %

15.5 %

*Table ordered by market size

**Includes principal, interest, taxes and insurance, assuming a 30-year fixed-rate mortgage with a 20% down payment and 5.23% interest rate on a home priced at the Zillow Home Value Index, or typical home value, for that area in May. 

1   The Zillow Real Estate Market Report is a monthly overview of the national and local real estate markets. The reports are compiled by Zillow Research. For more information, visit www.zillow.com/research.
2  Based on data from Freddie Mac
3 Assuming a new loan on a house priced at Zillow’s Home Value Index in May of $349,816, using a 20% down payment and a 30-year fixed-rate mortgage at 5.78%, includes taxes and insurance.
4 Assuming a new loan on a house priced at Zillow’s Home Value Index in April of $344,773, using a 20% down payment and a 30-year fixed-rate mortgage at 4.98%, includes taxes and insurance

About Zillow Group

Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life’s next chapter. As the most visited real estate website in the United States, Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and ease. 

Zillow Group’s affiliates and subsidiaries include Zillow®,, Zillow Premier Agent®, Zillow Home Loans™, Zillow Closing Services™, Trulia®, Out East®, ShowingTime®, Bridge Interactive®, dotloop®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).

 

SOURCE Zillow





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