Typical area buyers need to spend 14.4 percent of their income to afford the area’s median home value of $199,200, according to a report from Zillow. That’s significantly less than the 19.6 percent of income a typical homebuyer had to spend between 1985 and 1999 to afford a median-priced home in greater Philadelphia. In contrast, area renters had to shell out 28.5 percent of their income to pay a median rent of $1,543. In the mid-1980s and 1990s, renters had to pay only 18.2 percent of their income to afford the median rent in metro Philadelphia.
The story is the same in many metro areas throughout the country: buying is currently more affordable than historic norms in 94 of the country’s largest 100 metro areas, while homes for rent are more expensive than usual in 88 large metros. As rents keep rising – along with interest rates and home values – saving for a down payment and attaining homeownership becomes more difficult for millions of current renters, particularly millennial renters already saddled with uncertain job prospects and enormous student debt.
At the other end, many metros like Philadelphia, where the Zillow Home Value Index is up 2.3 percent on a year-over-year basis, have seen only moderate home value increases over the past 12 months.