[Chart via Zillow]
It seems like every day, there's some new study that tells us how unaffordable Los Angeles's rental market is, or how outstandingly expensive housing is here, but today, we have a study that says both. Great. New numbers from Zillow show that the Los Angeles metro area (LA and Orange counties combined) has the most unaffordable housing market—for buying and renting—in the US. It takes 42.6 percent of the LA-area median income ($59,424) to afford the median home ($529,200), but that's still better than dropping 47.9 percent of that paycheck on the median monthly rent ($2,392), right? Both of those stats stand out as the nation's highest, though SF matched LA in the percent-toward-housing category. (Housing is usually considered affordable when it costs 30 percent of a person's income.)
There are multiple things contributing toward this rampant unaffordability, according to the experts. For one thing, housing prices are going up faster than wages are. A UCLA study we dove into earlier this month showed that, since 2000, rents have increased 25 percent in LA, but the median income has dropped slightly. Zillow says "rents didn't experience the huge drop seen in home values during the recession, and instead have just kept climbing upward." That's why, as unaffordable as LA's housing prices are, its rents are even worse.
Though home prices seem to be topping out, the affordability is not expected to get better. Zillow and other market-watchers expect mortgage rates to rise in the coming year, which will drive buying further out of reach for a lot of people. Buying is technically more affordable than renting (see above), but how in the world is anyone supposed to save for a down payment when nearly half of their paycheck is going toward rent? "[T]he health of the for-sale market is directly tied to the rental market, where affordability is really suffering. As rents keep rising, along with interest rates and home values, saving for a down payment and attaining homeownership becomes that much more difficult," Zillow's chief economist says.
· Only a Dozen Large Metro Housing Markets Feature Both Affordable For-Sale Housing and Affordable Rental Housing [Zillow]
· 10 Charts That Show How and Why LA Has the Most Unaffordable Rental Market in the US [Curbed LA]
· The Average LA Home is Totally Unaffordable at Average Income [Curbed LA]