In this May 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?
Existing home sales decreased throughout the first quarter of 2023, but interested buyers in other parts of the country continue to drive demand and keep housing costs high. High-interest rates remain a challenge for potential homeowners. While many markets grew more expensive this month, more activity and inventory cooled asking prices in other areas. Buyers nationwide should study their respective housing markets to learn what to expect this season.
Key Findings
- Homeowners in 66 major cities must spend over 30% of their annual income on homeownership; that’s one city less than last month.
- In the 25 most unaffordable housing markets nationwide, homeowners direct over 40% of their income toward homeownership.
- The median purchase price decreased this month in the three least affordable housing markets – Miami, FL, Los Angeles, CA, and Newark, NJ.
The 5 Least Affordable Housing Markets
1. Miami, FL
Miami is the least affordable housing market this May. The median list price for a home decreased to $585,000, and homeowners can expect to spend 79.92% of their monthly income on the cost of homeownership.
2. Los Angeles, CA
Los Angeles remains the second most unaffordable housing market in the nation. Prospective buyers earning a median household income of $73,432 should expect to spend $4,742 monthly on mortgage and property tax payments.
3. Newark, NJ
Newark ranks as the third least affordable housing market in May, where the median listing price of a home held steady at $385,000. A local Newark family looking to own should set aside 72.41% of their annual income for homeownership costs.
While homeownership remains expensive, the city continues developing initiatives to help buyers down the line. Newark’s city officials recently discussed updates for their land and zoning use regulations that will create more space for residences, increasing inventory city-wide.
4. New York, NY
New York City has the fourth least affordable housing market in the country. The median purchase price for a home increased to $824,444 this month. Now, prospective buyers must direct 70.55% of their income toward homeownership.
Governor Kathy Hochul’s state-wide housing plan recently met strong opposition when discussing the New York budget. Failure to fund housing initiatives will keep housing costs unaffordable for buyers and renters.
5. Hialeah, FL
Hialeah regained its spot as the fifth most unaffordable housing market this month. The average family in this city spends $2,324 monthly on mortgage payments and property taxes, which translates to 65.79% of their annual household income, up 1.58% from the previous month.
The 5 Most Affordable Housing Markets
1. Detroit, MI
Detroit remains the most affordable housing market this month. The median purchase price for a home slightly increased to $81,900, Based on a projected median household income of $35,893, a typical Detroit family will have to spend 16.23% of their annual income, or $485,37 per month, on mortgage payments and property taxes.
2. Wichita, KS
Wichita is the second most affordable housing market nationwide. Those earning the median household income of $62,057 should allocate 19.45% of their income on housing costs, 2.52% more than in April.
3. Cleveland, OH
The housing market in Cleveland has remained stable since the start of 2023, and it again ranks the third most affordable housing market. Potential buyers generating a median household income of $36,709 will spend $1,005 on mortgage payments and property taxes.
4. Fort Wayne, IN
Fort Wayne became the country’s fourth most affordable housing market, replacing St. Louis. The median asking price for a home decreased to $204,900, and owners can expect to spend $1,089 on mortgage payments and property taxes per month.
Homes in Fort Wayne now take 31 days to sell, indicating lower demand than in previous months. Those who wish to buy property now will compete against fewer buyers and may be able to negotiate the purchase price with eager sellers.
5. St. Louis, MO
St. Louis decreased to the fifth affordable housing market in May. The median list price for a home currently sits at $179,000, and buyers would have to allocate 22.13% of their income toward homeownership costs.
Housing Markets to Watch in May
The following housing markets witnessed significant changes this month.
Kansas City, MO
Kansas City became more unaffordable this month, increasing seven spots in the rankings. In this city, the median price for a home is $239,000. Based on an LTV of 80%, an interest rate of 5.5%, and a mortgage term of 30 years, buyers will have to spend $1,329 monthly on home ownership costs.
Kansas City continues to grapple with low housing supply, which puts an upward pressure on the real estate values. Those who are looking to buy this year should brace for a competitive seller’s market with fewer available options.
Orlando, FL
Orlando also jumped seven spots higher this month, where homeownership became less affordable for buyers. Those with a median household income of $62,552 must now spend 37.81% on monthly owning costs.
Spring prompted more activity in Orlando’s housing market this month, where sales increased by 31.1% and shorter days on market. Higher demand from buyers pushes asking prices higher, even with more inventory.
Greensboro, NC
Prospective buyers in Greensboro can take advantage of a less expensive housing market, as the city dropped seven spots in the rankings in May. The median purchase price for a home decreased to $260,000, and buyers should expect to spend $1,424 on mortgage payments and property taxes. This translates to 28.63% of a household’s annual income.
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 300,000 listings in the RealtyHop database over the month prior to publication.
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, 5.5% interest rate, and 20% down payment.
Methodology Update
To better reflect the current housing market for the general America homebuyers, we have updated our methodology to include only the following property types: single-family homes, module homes, condos, co-ops, and townhouses. You may therefore see discrepancies between prior reports based on this change.
See below for previous RealtyHop Housing Affordability Studies:
- RealtyHop Housing Affordability Index: March 2023
- RealtyHop Housing Affordability Index: February 2023
- RealtyHop Housing Affordability Index: January 2023