While Boston home prices may be through the roof, a new analysis from Zillow has found the median area homeowner has substantially more income left over after paying their mortgage than their peers around the country.
However, the median Boston renter is paying nearly 32 percent of their gross income for housing, above the 30 percent mark that is typically considered the standard for maximum share of income that a homeowner or renter can afford to spend on their mortgage or rent.
Boston came in second after Washington, D.C. in the ranking. Assuming the median annual gross income and mortgage payment, homeowners in Washington, D.C., have almost $7,000 of their monthly income remaining after paying for their house, Zillow found, the most out of the country’s 35 largest housing markets. The typical renter in Washington, D.C., has nearly $6,500 left over from their salary after their monthly rent payment, second only to San Jose at more than $6,800.
In the Boston area, with an annual median gross household income of $81,838 according to the U.S. Census Bureau, the median homeowning household spends 25.4 percent of its gross income on its mortgage, the study found, giving it $67,165 left over for taxes and other expenses every year, or $5,597 per month. The median renting household spends 31.8 percent on rent, leaving it with $61,467 left over, or $5,122 per month.
According to real estate analytics firm The Warren Group, publisher of Banker & Tradesman, the median single-family sale price increased 4.9 percent on a year-over-year basis to $367,000 in January, marking an all-time high for the month.
Residents of Los Angeles and Florida feel the pinch the most. Los Angeles homeowners have the least left over ($3,450) after paying their mortgage each month, followed by Miami, Tampa and Orlando. Renters in the three major Florida metros have the smallest pools of remaining spending money after they pay rent, with Los Angeles following just behind.
“In our quest for happiness, or at least satisfaction, we must accept tradeoffs. A good-paying job with career growth potential often comes with expensive housing, leaving less for life’s other essentials such as taxes, child care, transportation, medical services, food and leisure,” Skylar Olsen, Zillow director of economic research, said in a statement. “Finding that balance where housing costs leave a comfortable amount of spending money is tricky, especially when the prices of life’s non-housing essentials also vary widely by market.”
Overall affordability for homebuyers worsened last year due to rising mortgage rates and continued strong home value appreciation throughout most of 2018. At its November peak, the average 30-year fixed rate in the U.S. had increased to 4.94 percent from 3.95 percent at the beginning of the year, according to the Federal Reserve Bank of St. Louis. However, mortgage rates have reversed course in recent weeks and dipped below 4.4 percent as future guidance has softened, while home value appreciation in the nation’s biggest markets is cooling rapidly – a signal that mortgage affordability could improve in the coming months.
According to BankRate.com, the average 30-year fixed-rate mortgage in Massachusetts currently has a 4.46 percent interest rate, up slightly from 4.41 percent last week.
