How to Analyze Affordability: Metrics and Trends to Watch

June 15, 2022

Over the past two decades, low mortgage rates and rising wages were able to offset rising home prices, but as the US economy faces inflation and the threat of recession, home affordability is becoming an important topic for single family and multi-family investors. 

Markerr can help investors identify and assess trends in affordability and how they impact your strategy. In this article, we’ll look at the metrics that affect affordability and how to measure them. 

There are a number of ways to track affordability. Here are the three most important metrics to follow:

  • Cost of Homeownership – We define the all-in cost of homeownership to include the mortgage payment, mortgage interest rate, property taxes, and home maintenance. Nationally, home prices are up more than 20% year over year and mortgage interest rates have increased by ~75%, according to Zillow and the Federal Reserve, respectively. As these metrics increase, homeownership becomes less affordable. 
  • Cost to Rent – Decreased affordability of homeownership impacts the demand for rentals. Our analysis of rent data through the end of 2021 shows that rent has also increased by 10% year over year (Markerr). With the threat of recession, landlords seek to be insulated from potential distress by cultivating a  renter base that can afford the payments. This makes it less likely to see higher bad debt and lower trade down risk.
  • Wages – Wages have not kept pace with the increase in the cost of homeownership or renting. Our analysis through March 2022 shows that median income across the U.S. only increased by 3.5% year over year.

Our Analysis of Rent Trends and Affordability

Markerr analyzed effective rent growth by market, occupancy trends and rent- to-income ratios for the top 100 markets in the US and found that Sunbelt markets, and Florida in particular, outperformed the rest of the country in terms of rent growth. As a result, Florida markets also saw dramatic declines in affordability, as measured by rent-to-income ratios. 

For rent growth, Gateway markets such as New York, the Bay Area, and Washington, D.C. were among the worst performers last year. New York is on the path to recovery, and showed +8.7% QoQ growth to end the year -1.3% compared to the pre-Covid period. Read more in our 2021 Rent Trends Report.

Our Data Can Enhance Your Analysis of Affordability

Markerr provides a more granular, timely view into affordability with insight into income, rent, and homeownership costs at the zip code level. We provide actionable data and insights from proprietary datasets including:

  • Income and Employment – Access payroll records for 16 million workers and 80,000 employers. 
  • Rent Data – Markerr’s RealRent data provides historical market and effective rents across more than 300 MSAs.
  • Housing and Supply – View transactions and supply for over 150 million single and multifamily properties in the US. 
  • Population and Migration – Leverage public data to project monthly population counts across the US

These powerful dataset can help investors gain a better understanding of rent-to-income ratios, household income, rents by zip code, and how migration can affect the affordability of an area. Our combination of real-time, proprietary data and public data can measure the delta between renting and owning. This Rent vs. Own Premium can help determine the homeownership rate for any MSA. 

To learn more about Markerr’s Affordability Bundle, contact us.