By S.E. Slack
Ohio is a great place to live and prospective home buyers are taking notice of the affordable housing currently available. If you’re thinking about purchasing a home, do it sooner rather than later say experts. Mortgage rates, currently hovering just above four percent, are expected to increase in the next few years. That will push some homeowners out of the housing market completely.
Real estate firm Zillow recently measured home affordability by looking at how much of a person’s monthly income is spent on a mortgage payment.
“(About a year ago) the average U.S. homeowner spent 13 percent of his income on mortgage payments,” says Svenja Gudell, director of economic research at Zillow. In many parts of Ohio, she says, homeowners spend about 12 percent on mortgage payments. Toledo and Dayton homeowners, for instance, spend 10 percent of their income on their home while homeowners in Cincinnati spend 12 percent.
When mortgage rates jump into the 5 percent range, however, affordability will become an issue for some Ohio home buyers. At five percent interest, affordability will mean 13 percent of a household’s income is slotted for the mortgage. At 6 percent interest, affordability leaps to 15 percent; at 7 percent interest that number hits 17 percent.
Still, that’s far below the national historic average of 20 percent affordability, says Gudell.
“Mortgage rates are currently forecasted to remain below 5 percent for the entirety of 2014,” says Gudell. That, she adds, will keep homes affordable in most parts of the country in the coming year.
If you’re thinking of heading West into the sunset, think twice, she warns. Research shows that, of the top 10 most expensive metro areas in the U.S., nine are in California. While some locales remain relatively reasonable with current affordability rates at 15 percent, homeowners in coastal locations like San Francisco and Los Angeles spend about 40 percent of their income on monthly housing payments.