According to the National Association of Realtors (NAR), the number of renters who can afford to buy a home has increased in 2020 to 38%. This increase is due in part to mortgage rates falling and incomes rising.
38% of Renters Can Afford to Buy a Home
Scholastica “Gay” Cororaton, a research economist for the NAR, stated that: “As mortgage rates have fallen and incomes have increased, the fraction of renters who can afford to purchase a home has increased from 33% in 2018 to 38% as of 2020 Q3.”
First-time homebuyers typically finance 93% of their home after a down payment of 7%, even though there are conforming mortgages available with lower down payments. By choosing to pay a higher down payment, first-time homebuyers are financing less of the purchase price, helping them save money with lower monthly mortgage payments.
Some metro areas are seeing new highs for percentages of renter households now able to afford to buy a home in 2020 Q3. These metros include:
- 5%: Topeka, Kansas.
- 3%: Waterloo-Cedar Falls, Iowa.
- 4%: Elmira, New York.
- 9%: Fond du Lac, Wisconsin.
- 7%: Decatur, Illinois.
- 7%: Peoria, Illinois.
- 5%: Wichita Falls, Texas.
Although a home purchase has become more affordable, a homebuyer with a family income of $49,242 or less will not be able to afford the typical single-family home in 2020 Q3 valued at $313,500. In this case, an average mortgage payment would equal around 29% of their income, which is above the 25% threshold of what is considered affordable.
Down payments also present a challenge for homebuyers. For many homebuyers, especially first-time buyers, zero down payment and low down payment programs may be available from the VA, FHA, and USDA.
According to the NAR, it could take today’s homebuyers up to 20 years to save for a 10% down payment without the assistance of down payment programs.
NAR Statistics in 2020 Q3
In 2020, 20% of renters could afford to buy a home in these metro areas:
- Honolulu, Hawaii
- San Diego, California
- Boulder, Colorado
- Barnstable, Massachusetts.
- Eugene, Oregon.
- Naples, Florida.
- Bridgeport-Stamford, Connecticut.
- Boston, Massachusetts.
Of the 172 metro areas for which NAR has metro level data, 55% are considered unaffordable.
In costly metro areas such as San Jose, Honolulu, or San Francisco, the average renter would have to spend more than half of their income on a mortgage payment.
If you are considering purchasing a home in the upcoming months, it is not too early to meet with a mortgage broker to be pre-approved. You can use this opportunity to learn about low down payment programs which might be available to you.
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in adjustable-rate mortgages, conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We have worked extensively with cash-out refinancing to help clients lower their monthly mortgage payments.