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Mortgage payments are higher than rental costs in 45 of the 50 largest U.S. metros following the Fed’s most recent rate hike last week, causing a steep drop in buyer demand across the country, Zillow reports. Mortgage rates averaged 5.78% last Thursday, sending monthly payments to $2,127 for the typical U.S. home, a 51% year-over-year gain significantly outpacing income growth nationwide.

Monthly payments currently account for 28% of the typical homeowner’s monthly income, making renting a more affordable option for the majority of Americans.

Incomes are lagging further behind fast-rising mortgage costs, leading to the most significant affordability challenges in the past 15 years. The latest affordability data available from April shows monthly payments taking about 28% of homeowners’ monthly income — dangerously close to the 30% threshold, beyond which is considered a cost burden. Zillow data for this metric is available through 2007; the Atlanta Federal Reserve’s Home Ownership Affordability Monitor shows affordability bottoming out in July 2006.

Although rents have soared since the start of 2021, the rapidly rising cost of a mortgage still makes rent the cheaper option nearly everywhere. A typical rent payment in May is more expensive than a mortgage payment (with a 20% down payment), including taxes and insurance, in just five of the 50 largest U.S. metros. In May 2019, rent was more expensive in 28 of those metros.

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