Majority of U.S. Homes Currently Very Affordable for Typical Buyers, But for How Long?

The majority of homes nationwide are more affordable now than they were in the years leading up to the start of the housing bubble, with home buyers currently spending a smaller share of their incomes on a mortgage than they have historically.

Nationwide, roughly two-thirds (66.4 percent) of homes for sale on Zillow are considered affordable, and in many metro areas, the majority of homes are more affordable now than they have been historically for typical buyers making the area’s median income, according to new research from Zillow.

But homes aren’t affordable everywhere. Among the 35 largest metros nationwide, more than half of homes currently listed for sale in Miami (62.4 percent), 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) are unaffordable by historical standards.

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Mortgage interest rates are currently very low, which helps home buyers’ dollars go further when buying a new home. But mortgage rates are rising, along with home values themselves, and as both go up, maintaining home affordability will become more challenging in a number of areas. In fact, in some areas, particularly in California, affordability is actually worse today than it was during the pre-bubble years.

Home buyers making the median income in Los Angeles, San Francisco and San Jose should already expect to pay a larger share of their income today toward a mortgage than during the pre-bubble years. Zillow expects mortgage rates on a 30-year, fixed-rate mortgage to reach or exceed 5 percent by the first quarter of 2015. Assuming rates at that level and another year of forecasted home value growth, home buyers in San Diego; Riverside, Calif.; Portland, Ore.; Sacramento; and Miami will also soon be paying a larger share of their incomes to their mortgage than they were during the pre-bubble years.

“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 centers in order to find affordable housing options,” said Zillow Chief Economist Dr. Stan Humphries. “We’re not in a bubble yet, but we’re beginning to see the early signs of one in some areas.”



30-Year Fixed Mortgage Rates Spike Eight Basis Points

Mortgage rates for 30-year fixed mortgages rose last week, with the current rate borrowers were quoted on Zillow Mortgage Marketplace at 4.27 percent, up from 4.19 percent at this same time last week.

The 30-year fixed mortgage rate surged early last week, peaking at 4.33 percent on Thursday before dropping down near 4.28 percent, where rates hovered for the remainder of the week.

“Last week, rates surged after the Federal Reserve suggested it might increase the Federal Funds Rate sooner and more significantly than expected, surprising many market observers who look to this rate for guidance on where mortgage rates are headed,” said Erin Lantz, vice president of mortgages at Zillow. “This week, we expect rates will inch up further on the momentum of last week’s direction from the Fed and expectations of positive news from economic data scheduled for release.”

Additionally, the 15-year fixed mortgage rate this morning was 3.22 percent and for 5/1 ARMs, the rate was 2.87 percent.

What are the interest rates right now? Check Zillow Mortgage Marketplace for mortgage rate trends and up-to-the-minute mortgage rates for your state.

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*The weekly mortgage rate chart illustrates the average 30-year fixed interest in six-hour intervals.


Why Did My Monthly Mortgage Payment Go Up?

Freaked out because your mortgage payment has increased? Before you write that next mortgage check, let’s investigate what’s going on with the payment. The increase could come from a number of factors and there may be something you can do about it besides paying more each month.

Many lenders incorporate the following elements into the bill for a typical 30-year mortgage:

Principal: This is the amount of the payment that goes toward paying off the original amount of money borrowed, excluding the interest.

Interest: This repays the lender for taking the risk on a loan. Initially, most of your monthly payment will go toward the interest.

Taxes: The mortgage company estimates the property taxes your county and/or state will charge, divides that amount by 12, and collects it monthly. The lender will then pay the taxes when they’re due each year.

Insurance: You can find two types of insurance in this portion of your bill. The first is yourhomeowners insurance. Lenders require you to have home insurance to protect their investment. The second is private mortgage insurance. If you did not make a down payment of at least 20 percent, your lender usually requires you to purchase this insurance. It protects the lender in case you default on the mortgage.

Why did my bill go up?

Let’s take a closer look at why your lender suddenly asked you to pay more. Typically, the total you pay toward the principal and interest should remain the same throughout the life of the mortgage (though the ratio of how much goes toward principal and toward interest will change).

Adjustable rate mortgages are the exception to this rule. This type of mortgage allows lenders to change the interest rate periodically. Adjustable mortgage rates are not as common as they once were, however.
More than likely, you can rule out principal and interest and look to one of the other two categories.

  • Property taxes — Your property taxes may have gone up. Contact your county and city to find your local tax rate. If taxes are the culprit, there’s little you can do – other than having yourproperty reassessed. This is risky because there’s no guarantee the assessed value of your property will go down, and it could go up, which would mean you’d owe even more.
  • Insurance payments — If it isn’t taxes, consider your insurance payments. Like principal and interest, private mortgage insurance premiums generally don’t change after your loan closes. So you can eliminate that as well. That leaves home insurance premiums. Providers do increase them from time to time, however there are steps you can take to reduce this cost.

Shop your policy

This is a good idea even if your monthly payments don’t increase. Consumer advocates recommend that you shop for new home insurance quotes at least once a year. Carriers evaluate risk differently, which means the potential exists for wide variances in premiums.

Ask about discounts

Providers offer a number of discounts. One of the most lucrative is the home/auto bundle. You can save up to 20 percent on your premiums simply by purchasing your home and car insurance from the same provider. You also can score price breaks of 10 percent or more for having a monitored home security system. Many providers give discounts if no one in the home smokes; that’s because it lowers the fire risk. Discounts vary widely by provider, so find out whether you’re receiving every price break available.

Increase your deductible

Another way to lower your monthly payment is to increase your deductible – the amount you’re responsible for paying when you file a claim. Be sure, however, to keep the deductible at an amount you can afford. Exercise great caution if you take this step.

The best advice? Monitor your mortgage payment and all its components. You can fight some increases, and you should.

Arthur Murray writes for, an online insurance resource for homeowners and drivers across the country. Offering comparative homeowners and automobile insurance rates, consumers rely on for the most competitive rates from the top-rated insurance carriers in the country. The blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.


Inforgraphic: What 1% Will Save You on Your Mortgage

If you are shopping for a new home, it’s equally important to shop around for the best mortgage rate, too. Rates can vary greatly between lenders and even seemingly small differences can end up saving – or costing you — a lot of money over time. Explore your options by comparing personalized mortgage rates to ensure you’re getting the right loan.

“Although the difference in monthly payment between a 4.5 percent interest rate and a 5.5 percent interest is not dramatic, your savings in interest paid over the life of the loan is significant,” said Erin Lantz, director of Zillow Mortgage Marketplace. “Mortgage rates will likely rise to 5 percent by the end of 2014 due to an improving economy and policy changes by the Federal Reserve. By buying a house while interest rates are still incredibly low, you could end up saving more than $52,000 over the course of 30 years.”

What 1% can save you on your mortgage


Buyers Expected to Gain More Leverage This Year as Inventory Across US Rises

Home values saw their smallest monthly increase since May 2012, up just 0.2 percent in January from December according to the latest Zillow Real Estate Market Reports. Year-over-year, U.S. home values rose 6.3 percent in January, down from peak gains of 7.1 percent in August 2013. This slowdown is in part due to the rise in inventory of for-sale homes across the country. The number of homes listed for sale on Zillow was up 11.1 percent annually in January, the fifth straight month of rising year-over-year inventory.

Home for saleAccording to Zillow Chief Economist Stan Humphries, home shoppers should expect to have more buying power this spring as more inventory comes onto the market and home prices start to level off.  This slightly more balanced market is another step on the road back to normal, and will help offset the impact of rising mortgage rates and more expensive homes for buyers.

Inventory rose year-over-year in 82 percent of metro areas covered by Zillow, with the largest inventory gains coming in some of the areas that were hit hardest by the housing recession, including Las Vegas (up 42.8 percent), Phoenix (up 30.5 percent) and Sacramento (up 26 percent). These metros also experienced significant cooling in the pace of home value appreciation in January, as buyers had more homes to choose from and were less apt to engage in the kinds of bidding wars that helped drive prices up so quickly last year.

Want to know what the current state of the housing market is where you live?  Dive into Zillow’s data, available all the way down to ZIP code and neighborhood levels,here.

For a deeper analysis from Dr. Stan Humphries visit Zillow Research.

Home Value and Inventory Trends in the 35 Largest Markets

U.S. Metro

Zillow Home Value Index (ZHVI), Jan. 2014

Y-o-Y % change in ZHVI

Median # of Homes for Sale on Zillow, Jan. 2014

Y-o-Y % Change in Inventory

United States





New York, NY





Los Angeles, CA





Chicago, IL





Dallas-Fort Worth, TX





Philadelphia, PA





Houston, TX





Washington, DC





Miami-Fort Lauderdale, FL





Atlanta, GA





Boston, MA





San Francisco, CA





Detroit, MI





Riverside, CA





Phoenix, AZ





Seattle, WA





Minneapolis-St Paul, MN





San Diego, CA





St. Louis, MO





Tampa, FL





Baltimore, MD





Denver, CO





Pittsburgh, PA





Portland, OR





Sacramento, CA





San Antonio, TX





Orlando, FL





Cincinnati, OH





Cleveland, OH





Kansas City, MO





Las Vegas, NV





San Jose, CA





Columbus, OH





Charlotte, NC





Austin, TX





Virginia Beach, VA






Survey: Home Shoppers Should Have an Easier Time this Spring

Could home buyers have less competition and an easier time to find the home of their dreams as the home shopping season begins to heat up? The answer is yes.

According to data from the latest Zillow Home Price Expectations Survey, which surveyed 110 economists, real estate experts and investment and market strategists, it found that investors — both individuals and companies who bought up lower priced and foreclosed homes throughout the recovery — are expected to take a step back in their activity.

What this means for home buyers is that the level of competition may ease up a bit.

“Buyers entering the market in the next few months will not be competing with cash-rich investors like they were last year, which should be some small solace given the higher prices and mortgage rates that they will encounter,” said Zillow Chief Economist Dr. Stan Humphries.

During the depth of the housing recession, when few home buyers were active in the market, investors purchased thousands of homes nationwide, fixing many of them up and keeping them in their portfolios as rental properties. This activity helped put a floor under sales volumes. But as the recovery progressed, investor demand created competition for many would-be buyers and contributed to rapid price spikes in some areas.

“Real estate investors, both large and small, played a crucial role in helping to stabilize markets during the darkest days of the housing recession, but a decline in investor activity now isn’t necessarily a bad thing, and could have real benefits for buyers,” said Humphries.

Humphries explained that the gradual decline of investor activity should be seen as another sign of the market slowly returning to normal. However, he agreed with the survey panelists that there wouldn’t necessarily “be a rush for the exit by institutional investors.”

In regards to home values, panelists said they expected an average home value appreciation of 4.5 percent nationwide through the end of this year, a pace that exceeds historically normal annual appreciation rates of around 3 percent. This appreciation is expected to slow to roughly 3.8 percent in 2015 and 3.3 percent by 2018 — rates much more in line with historic norms.

Based on current expectations for home value appreciation during the next five years, panelists predicted that overall U.S. home values could exceed their April 2007 peak by the first quarter of 2018, and may cross the $200,000 threshold by the third quarter of 2018.

Panelists were also asked when the Federal Reserve should end its ongoing stimulus efforts, known as “quantitative easing.” Since September 2012, the Fed has been purchasing tens of billions of dollars worth of Treasury bonds and mortgage securities each month, which has helped keep mortgage interest rates low and stimulate demand. The program is now being wound down, and more than 70 percent of panelists said they would like to see it end before the end of the year.


It’s Tax Time! See Tax Breaks for Homeowners!

Calling all homeowners!  With tax season rapidly approaching, it’s time to get your paperwork in order and consider all the ways to minimize your tax liability.  Whether you’ve got a single-family home, a town house, condo, or even a floating home, there are various home-related expenses that you should be sure to deduct. We suggest starting with these:

Mortgage interest

The mortgage interest deduction has long been the most-beloved tax benefit of homeowners since it’s such a big money saver (especially in the early years of a home loan).  In fact, Americans save around $100 million every year by claiming this deduction, which you can take on both your primary and secondary homes, providing your loan is less than a million dollars, and providing you itemize your return.

Mortgage points

The IRS sees points — percentage-based fees which a lender charges to originate a loan — as form of mortgage interest paid in advance.  Assuming you meet certain requirements, you can therefore deduct these points, in full, in the year that they were paid. So, for example, if you paid two points on a $250,000 mortgage in 2013, you can write off $5,000 on your 2013 tax return. What if you refinanced a mortgage last year? Then, you would have to deduct the points over the life of the loan. That means you can deduct 1/30th of the points a year if it’s a 30-year mortgage.  Granted, that’s only $33 a year for each $1,000 of points you paid, but every little bit helps.

Property taxes

Once you see what you, (or the holder of your escrow account), paid in property taxes in 2013  —  (find that number by looking at the annual statement you recently received from your lender; or if your taxes aren’t included in escrow payments made with your mortgage payments, then look at your cancelled checks)  —  enter that amount on your Federal form. Property taxes must be taken as an itemized expense. The tax you pay – each year – is deductible, for as long as you own the home. See Schedule A, line 6.

Home improvements

In what may be considered a sign of market confidence about the long-term prospects for the recovery, homeowners took on all sorts of remodeling projects last year. Chances are, you did, too.  Whether you added square footage, put on a new roof, or made other “capital improvements” to your home, know that the money you spent on these projects – which increase your home’s value (as opposed to non-eligible repairs which just return something to its original condition) – can help lower your tax bill when you sell your home. Try using a free tool like Zillow Digs to get a sense for how much a remodeling project will run you and whether it will be a good return on your investment.

And as always, save your receipts!


Vera Gibbons is a financial journalist based in New York City and is a contributor to Zillow Blog. Connect with her at Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.