Average Americans could expect to pay 15% of their income toward their mortgage payment while expect

.According to Zillow, today’s mortgage payment is quite affordable when compared to historic norms where home buyers were expected to pay 21 percent of their income on a monthly mortgage payment (on average, between 1985 and 2000). As of the end of 2015, Americans making the nation’s median annual income ($55,589) and looking to buy the typical American home (valued at $183,600 as of December) could expect to pay only 15 percent of their income towards their monthly mortgage payment.

As for the same American looking to rent a typical home, they should plan to set aside 30 percent of their income each month to pay their landlord. Unlike paying a mortgage, paying rent today is much less affordable than it was historically. Homeowners tend to have a few more housing affordability advantages than renters. Today’s incredibly low mortgage interest rates will ensure that mortgages remain generally more affordable than rents for the foreseeable future. The current prevailing rate on Zillow Mortgages for a 30-year, fixed-rate mortgage is 3.4 percent, a near all-time low. Since mortgage interest rates have been very low, and fixed, it helps keep monthly payments low even as other expenses may grow with inflation.

There’s also the fact that home values nationwide and in most local markets still remain below the levels reached prior to the recession. U.S. home values have been growing fairly rapidly for several years now, but remain 5.9 percent below pre-recession peaks as of February. In other words, buyers in most markets can expect to pay less for a home today than they would have roughly ten years ago. The one-two punch of low mortgage rates and relatively low prices gives homeowners a significant housing affordability advantage over renters.

Renters don’t take out mortgages, of course, and so don’t benefit from today’s ultra-low mortgage interest rates. More importantly, rents have been rising faster than wages recently, which has created an affordability issue for many renters.

And while the pace of U.S. rental growth has slowed in recent months from an annual pace of more than 6 percent to a more sustainable 2 percent to 3 percent annual pace, they’re still growing, and are expected to continue to do so. And, as always is the case, monthly rent will bring renters no closer to owning their residence, whereas a monthly mortgage is structured with ownership as an achievable goal.

Rent VS OWN Comparison: What could your rent buy you?

Ref: http://www.zillow.com/research/housing-affordability-q4-2015-12111/

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