WASHINGTON STATE

Washington State House Democrats

HOUSE DEMOCRATS

Is home ownership out of reach in Washington state?

Affordable housing is a key issue for lawmakers this year, with numerous bills and programs aimed at the issue every session.

Three key costs for every family are housing , transportation and food – but housing, whether you rent or buy a home, is typically the largest expensive. If you want to really get into the issue, check out the state’s Affordable Housing Advisory Board.

So are things getting better or worse in Washington state? And should you rent or buy?

A new study by Zillow.com says buying a home is actually more affordable today than in the past, even in the most expensive housing market in Washington state: Seattle-Tacoma-Bellevue. You can read the full report here: Homeownership Is Affordable for First-Time Buyers, If They Can Clear Hurdles.

Seattle Refined dug into the numbers and summed up the entire report by making the counter-intuitive point that renting, as a percentage of income, is tougher than buying a home.

Here’s what Seattle Refined said:

More specifically, renting is 36 percent more expensive than the historical norms (aka before the housing bubble), while buying is 13.6 less expensive.

% of Income Buyers will Spend in 2015 % of Income Renters will Spend in 2015
Seattle 22.1 30.8
Nation 15.3 29.9

Zillow drills down into what’s happening here:

As rents continue to soar, buying a home looks like a downright bargain compared to renting. But not all home buyers are created equal, and younger, first-time buyers will face a few additional hurdles that more experienced buyers may not have to contend with.

It’s true that buyers of all means who step into the market today will have a much different (and likely a bit better) experience from that of home shoppers in the recent past, thanks to gains in inventory, continued low mortgage rates and less competition from investors and all-cash buyers. Additionally, the oldest millennials are reaching their mid-thirties and slowly joining the home buying hunt, helping to boost demand in the market and encouraging some sellers who may have had trouble finding buyers for their homes in previous years.

But the realities of the Great Recession remain, particularly for younger Americans. Many households lost their jobs, their homes and their savings during the recession, which pushed them into rentals en masse. This surge in rental demand led rents to rise to unaffordable levels and forced many traditional renters—new graduates and younger workers earning entry-level salaries—to compete for available apartments with families displaced by foreclosure. At the same time, college educations became more expensive, and many millennials left school saddled with huge debt burdens.

So while unemployment rates are dropping and labor markets are picking up, overall savings are still lagging. Putting 20 percent down on a home remains impossible for many millennial, first-time homebuyers. So how affordable is a mortgage for the average millennial or first-time buyer?

To answer this question, we assume a first-time buyer makes the median income of all 23- to 34-year-olds in a given area[1], attains a 30-year fixed rate mortgage with only 5 percent down and shops for a home priced according to the 33.3 percentile[2] of all home values[3]. By contrast, our traditional affordability numbers are reported assuming a household earns the median household income across all ages, purchases the median (50th percentile) valued home with 20 percent down on a 30-year fixed rate mortgage.Learn About Tableau