10 cities with the most renters who could afford to buy

October 10, 2016 | By

While the homeownership rate is at its lowest level in 50 years, incomes and credit scores at least may not be holding back as many people from owning as one might think.

The Commerce Department reported that the U.S. homeownership rate was 62.9 percent in the second quarter of this year, the lowest since 1965. Sky-high home prices can make homeownership a challenge for many homeowners in cities like San Jose and San Francisco. But according to one report from Zillow, those are the two cities with the largest segments of renters who could afford to purchase a median-priced home in those communities.

Zillow examined the self-reported credit scores and incomes of renters and median home values during the first half of this year to create its list of cities with the highest percentage of renters who could afford to buy where they live.

The Wild West

The competitive Californian housing markets of San Jose, San Francisco, and San Diego topped the list.

In metropolitan San Jose, the median home value is $957,900 while the percentage of renters with “sufficient” credit scores and incomes to buy, based on that median home value, is 35.6 percent. In San Francisco metro, the median home value is $812,300 while the percentage of renters with sufficient credit scores and incomes there is 26.8 percent.

It’s important to note that home value may not be the same as listing price. And in competitive markets, a shortage of housing inventory can make it difficult for even the most willing buyers to buy a home. And, notes Zillow, many Americans prefer to rent for “lifestyle reasons.”

Even Rentals Are Tough to Find

“San Jose, San Diego, and Seattle are among the most competitive places for buyers, and the going isn’t any easier for renters – as they are competing against throngs of financially sound applicants with strong credit and high incomes,” Zillow chief economist Svenja Gudell says.

“This is a conundrum for many young people who move to those cities because of their strong job markets, only to find tight inventory and steep competition standing between them and their dream home,” he says.

10 Cities with Highest Percentage of Renters with Sufficient Credit Scores and Incomes to Purchase Median-priced, In-market Homes

  1. San Jose: 35.6 percent
  2. San Francisco: 26.8 percent
  3. San Diego: 23.6 percent
  4. Los Angeles: 22.7 percent
  5. Seattle: 21.6 percent
  6. New York: 19.4 percent
  7. Boston: 18.2 percent
  8. Washington, D.C.: 17.4 percent
  9. Portland, Oregon: 16.8 percent
  10. Denver, Colorado: 16.2 percent

Source: “Many Big-City Renters Earn Enough to Buy,” published on Zillow.com on August 12, 2016. 

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