In this August edition of the RealtyHop Housing Affordability Index, we examine what American households across the 100 largest cities need to spend on housing to find out:
Is homeownership affordable or possible for the average American family?
While mortgage rates have inched down, affordability challenges persist, with most major markets requiring households to spend a large share of their income on housing. However, local market conditions continue to vary widely, creating pockets of opportunity for potential buyers to take advantage of. As always, those thinking about buying should consult with local market experts to understand pricing in their area.
A note about this report: we adjusted our methodology to take into account income growth. Please see the Methodology section below for more information.
Key Findings:
- Homebuyers in 75 out of the 100 major cities we analyzed would have to spend over 30% of their annual income on homeownership.
- In 15 cities in the index, homeowners must spend over 50% of their income on homeownership costs, indicating severe unaffordability.
- California remains unaffordable for average Americans. Seven of the ten least affordable markets are in California.
- The most affordable region in the United States is the Midwest, where homeowners spend around 28% of their income on housing costs.
- Buyers in Cleveland, OH, Toledo, OH, and Detroit, MI are currently the only three cities in the study where monthly homeownership payments sit below $1,000.
The 5 Least Affordable Housing Markets
1. Los Angeles, CA
Los Angeles remains the country’s least affordable housing market. The median list price slightly decreased to $1,170,000, and families can now expect to spend 91.79% of their income on monthly housing costs.
2. Irvine, CA
Irvine is the second least affordable housing market. Households with a median income can expect to spend $9,677.61 monthly on mortgage payments and property taxes. That’s 82.45% of their income.
3. Miami, FL
Miami remained the third least affordable housing market this month. Households with a median income of $64,525 will need to direct 76.29% of it toward the cost of homeownership.
4. New York, NY
New York City held onto its spot as the fourth least affordable housing market. The median list price of $889,000, and potential buyers can expect to spend $5,100.36 monthly on homeownership.
5. Newark, NJ
Newark remained the fifth least affordable housing market. Households can expect to direct 71.54% of their income towards purchasing a home with the median list price of $445,000
The 5 Most Affordable Housing Markets
1. Detroit, MI
Detroit is still the most affordable housing market in the nation. The median list price currently sits at $109,000, with households only needing to allocate around $690 a month on homeownership expenses.
2. Toledo, OH
Toledo held onto its spot as the second most affordable housing market. Households with a median income of $51,641 should expect to spend $843.90 on their monthly mortgage payments and property taxes.
3. Cleveland, OH
Cleveland moved up one spot in the rankings to become the third most affordable housing market this month. The median list price decreased to $135,000, and prospective buyers can expect to direct 24.69% of their income toward the cost of homeownership.
4. St. Louis, MO
St. Louis is the fourth most affordable housing market this month, due to the 24.69% of income that homeowners would need to direct towards owning a home with the median price of $204,900.
5. Kansas City, MO
Kansas City remains the fifth most affordable housing market. The median list price sits at $250,000 and households can now expect to spend $1,530.43 monthly on mortgage payments and property taxes.
Housing Markets to Watch
The following housing markets witnessed significant changes this month:
Las Vegas, NV
Las Vegas became more affordable for prospective buyers this month, dropping to the 32nd spot in our ranking. Households with a median income of $76,837 can expect to spend $2,648.25 monthly on mortgage payments and property taxes.
Orlando, FL
Orlando homebuyers can expect to spend more money this month on housing. The median list price sits at $399,000, causing the city to move six spots in the rankings to become the 43rd least affordable housing market.
Fresno, CA
Fresno jumped six spots in the rankings to become the 29th least affordable housing market this month. The median list price is currently $435,000, and households can now expect to spend 41.98% of their income on housing.
Methodology
The RealtyHop Housing Affordability Index analyzes proprietary and ACS Census data to provide an index of housing affordability and homeownership burden across the 100 most populous cities in the country. Median home prices are calculated using over 800,000 listings in the RealtyHop database over the month before publication.
This month, to ensure that our Affordability Index properly reflects the incomes of American households, we updated our income numbers to keep up with wage growth.
To calculate the index, the following statistics are used:
1) Projected median household income
2) Median for-sale home listing prices via RealtyHop data
3) Local property taxes via ACS Census data
4) Mortgage expenses, assuming a 30-year mortgage, a 6.65% mortgage interest rate based on reported weekly averages in the past four weeks, and a 20% down payment.
See below for previous RealtyHop Housing Affordability Studies:
