Comparing Mortgage and Rent Affordability in 2014 Q1

Affordability remains a hotly debated topic, especially when considering both rent affordability and mortgage affordability. With mortgage rates on the rise, albeit a slow rise, affordability has the potential to become a serious problem in some areas of the nation, especially if incomes don’t rise appropriately.

Find rent and mortgage affordability stats, as well as a mortgage affordability forecast for 289 metropolitan areas for 2014 Q1, below.

You can view our previous post on mortgage affordability here and our previous rental affordability post here.

Methodology:
nTo calculate mortgage affordability, we first calculate the mortgage payment for the median house price in a metropolitan area by using the metro-level Zillow Home Value Index for a given quarter and the 30-year fixed mortgage rate during that time period, which is provided by the Freddie Mac Primary Mortgage Market Survey (based on a 20 percent down payment). Then we consider what portion of the monthly median household income goes toward this monthly mortgage payment.

The affordability forecast is calculated similarly to the current affordability index but uses the one year Zillow Home Value Forecast instead of the Zillow Home Value Index and a specified interest rate in lieu of PMMS. It also assumes a 20 percent down payment.

We calculate rent affordability similarly to mortgage affordability; however we use the Zillow Rent Index, which tracks the monthly median rent in particular geographical regions, to capture rental prices.