Apartment-dwelling San Diegans paid an average of 43.7 percent of their income on rent in the second quarter of 2015 -- and mortgages aren’t relatively affordable here either, according to a new report from Seattle-based Zillow Group.
Given the oft-stated rule that no more than a third of a person’s income should be paid for rent, San Diego is less affordable than many other markets in the western United States.
Along with San Diego, “Denver, Los Angeles, San Francisco [and] San Jose are unaffordable for both renters and buyers,” the report stated.
"Our research found that unaffordable rents are making it hard for people to save for a down payment and retirement, and that people whose rent is unaffordable are more likely to skip out on their own healthcare," said Svenja Gudell, Zillow (NASDAQ: Z) chief economist. "There are good reasons to rent temporarily -- when you move to a new city, for example -- but from an affordability perspective, rents are crazy right now. If you can possibly come up with a down payment, then it's a good time to buy a home and start putting your money toward a mortgage."
“Renters in the U.S. can expect to put an average 30.2 percent of their monthly income toward rent – the highest percentage ever. Before the real estate bubble and bust, U.S. renters could expect to spend about 24.4 percent of their incomes on rent,” the report stated.
MarketPointe Realty Advisors -- which limits its surveys to apartments with 25 or more units -- said the average monthly rent in San Diego County was $1,575 in March, compared to $1,448 in the like month a year earlier.
MarketPointe reported that if a survey just includes apartments constructed since 2010, the average San Diego-area rent had already reached $2,167 per month as of the end of March.
Vacancy rates vary, depending on the survey. The San Diego County Apartment Association pegged the average vacancy at about 4.1 percent. MarketPointe pegged the rate only at about 2.51 percent in its March 2015 report.
The report said affordability problems don't stop at rentals: Nationally, Zillow reported that buyers should expect to pay an average of 15.1 percent of their income towards mortgage payments. In San Diego by contrast, an average of 34 percent of homeowner income was spent on a mortgage in the second quarter.
A California Association of Realtors report found that to afford a median priced home of $547,840 in San Diego County, a $108,390 household income is required translating into a $2,710 average monthly payment including taxes and insurance.
By those parameters, 25 percent of households are able to afford a median priced home here.
“In Denver and four California metros, (including San Diego) both renters and buyers can expect to pay more of their income towards either rent or mortgage payments than in pre-bubble years," the report continued. "In hot San Jose, renters and buyers should each plan to put about 42 percent of their incomes towards housing.”
Mortgage payments appear to be generally much less of an issue in the nation as a whole.
“Mortgage payments will continue to be affordable even if mortgage rates rise as expected. If rates reach 6 percent next year, homebuyers can still expect to spend 30 percent or less of their income on mortgage payments in 265 out of 290 (91.4 percent) of the metros Zillow analyzed, and mortgage payments will be considered more affordable than in pre-bubble years in 72.1 percent of metros.
“Rents, on the other hand, are already unaffordable compared to historic norms in 77 percent of metros, and with relatively stagnant wage growth, this likely won't improve as rents keep climbing, the Zillow report concluded.