Zillow Study Finds 6.0% Rates Must Fall to 4.43% for Affordability
A Zillow study finds that U.S. mortgage rates must fall from 6.00% to around 4.43% for a median-income family to keep monthly payments at or below 30% of income. In New York, Los Angeles, Miami, San Francisco, San Diego and San Jose unaffordability persists even with a 0% mortgage rate.
1. Required Rate Drop and Methodology
The Zillow study defines affordability as monthly principal and interest at no more than 30% of median household income, assuming a 20% down payment. It finds that the 30-year fixed mortgage rate must decline from the current 6.00% to 4.43% nationally to reach that threshold.
2. Pricier Metros Remain Unaffordable
In six major metros—New York, Los Angeles, Miami, San Francisco, San Diego and San Jose—housing costs surpass affordability even with a 0% mortgage rate. In Boston and Seattle, borrowing costs would need to fall below 1% to meet the affordability definition due to high taxes, insurance and maintenance expenses.
3. Regions Affordable Despite Higher Rates
A cluster of Midwest and Inland South markets would remain affordable with rates above 6.7%, including Pittsburgh, Birmingham, Detroit, Buffalo, Indianapolis, St. Louis, Memphis, Chicago, Cleveland, Louisville and Oklahoma City. For example, average home values of $228,571 in Pittsburgh and $75,511 in Detroit allow buyers to absorb rates near 9% and 7% respectively.