3 markets where housing is more affordable than its historical average

This is where housing is relatively affordable.

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Home prices have skyrocketed in recent years, with CoreLogic revealing in its latest report that home prices grew 20.9% year over year in April 2022, marking the 123rd month of price increases. Mortgage interest rates have also been rising, and some professionals say we’ll see more to come (You can see the lowest mortgage rates you may qualify for here.) And, for its part, mortgage technology and data provider Black Knight concluded in a recent report: “Housing is now a whisper away from the all-time low in affordability seen at the peak of the market in 2006.”

These affordability issues have undoubtedly led many homebuyers to ask: How can I afford a house in my hometown? For many, the answer is: you can’t. But we dug into the Black Knight data to find metro areas where housing affordability is actually higher now than it has been based on historical averages.

There are only three markets out of 100 that are more affordable to residents now than they were on average between 1995 and 2003: Chicago; McAllen, Texas; and, DesMoines. (The company measures home affordability using the payment-to-income ratio, which looks at the portion of the metro area’s median income needed to make the monthly principal and interest payment on the purchase of the median-priced home using a 20% down payment, 30 year fixed mortgage.)

Black Knight also looked at areas where the pay-to-income ratio was lower, indicating that housing is relatively affordable for residents. Here are the results:

Top 10 Most Affordable Real Estate Markets

City

Payment-income ratio

Milwaukee, WI

24.5%

Louisville, Kentucky

23.9%

Pittsburgh, Pennsylvania

23.3%

Chicago, IL

23.3%

Rochester, New York

23.2%

Cleveland, Ohio

22.8%

Cincinnati, Ohio

22.8%

Kansas City, MO

22.4%

Detroit, MI

22.1%

Saint Louis, MO

21.4%

Housing in areas like St. Louis, Cincinnati, Chicago and Louisville tends to be more affordable in part because those markets are more locally driven, says Realtor.com chief economist Danielle Hale. “Illinois markets, in particular, have a lot of local homebuyers rather than attracting homebuyers from outside the area,” says Hale. (You can see the lowest mortgage rates you may qualify for here.)

You’ll notice a big pay-to-income difference between the most and least affordable metro areas. “So far, the affordability gap remains wide between the most expensive and cheapest markets,” says Jeff Ostrowski, an analyst at Bankrate. “On the supply side, coastal markets are geographically restricted in buildable land compared to inland cities where suburban development can continue to expand outward. More expensive markets also tend to impose stricter regulations on new construction than less expensive metro areas,” says Ostrowski.

Top 10 Least Affordable Real Estate Markets

City

Payment-income ratio

Los Angeles California

69.6%

San Jose, California

65.0%

San Diego, California

63.8%

San Francisco, CA

58.1%

The Vegas, Nevada

50.8%

Seattle, WA

48.7%

Riverside, Calif.

45.8%

Sacramento, Calif.

44.9%

Phoenix, Arizona

44.5%

Miami Florida

44.2%

“Even compared to income, housing in these big cities is expensive. That’s because, at least in part, these areas are desirable and attract not only homebuyers, but also investors and second-home buyers looking for the jobs, culture and cache these cities offer. Buyers are willing to pay more to be in these areas,” says Hale.

In addition, “any of the markets with the least affordable housing have seen strong population growth and therefore increased demand for housing, while the Midwest markets have not seen as many people move out, which helps keep housing relatively affordable,” says Zillow economist Nicole Bachaud. .

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