Zillow: High Levels of Home Affordability Won't Last

By: Tory Barringer, DSNews.com

Even as prices continued to rise in last year’s 4th quarter, American homeowners found themselves paying less in monthly mortgage payments compared to pre-bubble norms, according to Zillow.

Zillow analyzed current and historic median home values as determined by the Zillow Home Value Index, comparing it to median income data from the Census Bureau and the Bureau of Labor Statistics. Researchers used the data to calculate an affordability index (measuring the portion of monthly income homeowners spend on mortgage payments) and a price-to-income ratio.

According to the findings, the average consumer paid nearly 37 percent less per month on their mortgage payments than they did pre-bubble, even as homes themselves cost 14.5 percent more (compared to historic averages relative to U.S. median incomes).

In the pre-bubble period (1985-1999), when 30-year fixed rates ranged between 6 percent and 13 percent, Americans spent on  average 19.9 percent of the median monthly incomes on mortgage payments for a typical, median-priced home, Zillow found

At the end of Q4 2012, with mortgage rates in the 3 percent to 4 percent range, homeowners paid just 12.6 percent of their monthly income on mortgage payments, down 36.9 percent from pre-bubble norms. . . . . to continue reading article