Zillow: Mortgage payments biggest financial burden since 2009

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The share of median income needed for monthly mortgage payments on the median U.S. home increased to 17.1%, which is the largest share of income since 2009, according to Zillow’s latest affordability report. 

This is up from 15.9% in the fourth quarter of 2017, making it the second biggest quarterly increase in the mortgage burden since the housing market collapsed in 2007, according to the report.

The report states that for nine of the 35 biggest U.S. metros, mortgage payments are a bigger financial burden than they were historically from 1985-2000, when payments took up an average of 21.1% of the median income.

“For the past few years, historically low mortgage rates provided the silver lining for buyers as prices rose higher and higher. If you were able to come up with a down payment, the low rates kept monthly housing costs relatively affordable in most parts of the country,” Zillow Senior Economist Aaron Terrazas said. “Now, though, as rates are on the rise and home values are climbing at their fastest pace in 12 years, that affordability edge is getting thinner.

“In markets that have seen some of the biggest increases in home values, housing costs already take up a larger share of income than they did historically, making it all the more difficult for buyers,” Terrazas said.

Seven cities along the West Coast increased from their historic average of 35.8% to 51.2 % of the median income. This is the highest required in any of the top metros.

San Jose has the least affordable mortgage payments in all of the U.S., requiring more than half of the typical income, according to Zillow.

The report speculates that if mortgage rates climb to 5% next year, home shoppers in these seven markets may face greater mortgage burdens than any other buyers in U.S. history.

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