San Jose/ Shutterstock
People throughout the nation continue to rent because they cannot afford to purchase a home, right? Not necessarily, according to a new Zillow report, which says 14 percent of renters could afford and qualify to buy a home throughout the nation’s largest rent-friendly metros.
Renting is often a choice, and real estate agents know all too well the impact it has on the housing market. According to Zillow’s financial qualifications analysis reported in the Renter Profile, California cities are home to the largest percentage of renters who are able to purchase a property.
San Jose, San Diego, San Francisco and Los Angeles are some of the most highly in-demand rental cities where its residents can very likely purchase a property if they wanted, according to Zillow.
“When faced with hurdles of high prices and low inventory, first-time homebuyers are renting longer than ever before, even if they are qualified to buy,” Zillow chief economist Dr. Svenja Gudell said in a statement.
Younger demographics putting marriage and kids on the back burner do not appear interested in being tied down to a mortgage and a more permanent lifestyle.
“San Jose, San Diego and Seattle are among the most competitive places for buyers, and the going isn’t any easier for renters — as they are competing against throngs of financially sound applicants with strong credit and high incomes,” Gudell said. “This is a conundrum for many young people who move to those cities because of their strong job markets, only to find tight inventory and steep competition standing between them and their dream home.”
Metros with the highest share of qualified homebuyers
The top four cities for the largest share of renters who can afford a home are located in California, Zillow says. San Francisco ranked in the second spot, right below San Jose. In San Francisco, 26.8 percent of renters have a sufficient income to afford a median home, and 26.2 percent of renters have a sufficient income to afford a rental property. The Median Zillow Home Value Index was reported at $812,300 in San Francisco, and the homeownership rate in San Francisco is 53.2 percent.
In Los Angeles, where the homeownership rate is 48.3 percent, 22.7 percent of renters can afford a home. The Zillow median home value is $572,400 in L.A. According to Zillow, just a sliver more of renters can afford to buy a home than those who have a sufficient income for the median rental rate (22.6 percent).
New York City’s median home value is $386,800, according to Zillow. This means that 19.4 percent of renters in the Big Apple can afford a home but choose to rent, and 19.1 percent can afford a median rental. The homeownership rate in New York is 50.7 percent.
The nation’s capital has a homeownership rate of 62.6 percent, which was the highest reported among metros where renters are more qualified to purchase a home. Washington D.C. ranked no. 8 on the list, with a median home value of $368,700, and the percentage of renters who can afford to buy a home or to rent a place both sits at 17.4 percent.
Metros where homebuying can be a struggle
Ranking no. 1 as the top metro for renters who are struggling to qualify to buy a home, is Houston. The Texas metro has 6.8 percent of its renters qualified to buy a median priced home of $172,900. However, the homeownership rate is fairly high in the metro, at 59 percent.
Baltimore also ranked on the list, with a homeownership rate of 65.5 percent. In the metro, 8.9 percent of renters can afford to either buy a median priced home or rent a place.
