Markets & Economy

Eroding home affordability carries housing bubble concerns

Zillow: One-third of US homes for sale in 4Q 2013 were unaffordable

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As home prices and mortgage interest rates rise, potential homebuyers are finding that fewer homes are within their financial grasp, prompting parallels to the most recent housing bubble. A study by real estate portal Zillow has found that, for a full one-third of homes for sale nationwide in the fourth quarter, buyers would pay a larger percentage of their income toward a mortgage than in the pre-bubble era. Zillow analyzed fourth-quarter income, mortgage and home value data. The company measured affordability by comparing how the share of an area's median household income needed to cover the mortgage payment of a median-priced area home in the fourth quarter measured relative to the income-share needed to make a mortgage payment on a median-priced home in the same area between the years of 1985 and 2000. While two-thirds of U.S. homes for sale were affordable in the quarter compared to the pre-bubble years, Zillow expects affordability to wane as interest rates on 30-year ...