In this March 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?
With interest rates and purchase prices decreasing in numerous markets across the country, potential homebuyers have more options and purchasing power than they did in 2022. While homeownership remains unaffordable in most markets, those who held off from purchasing property last year may find current conditions more favorable.
Key Findings
- Homeowners in 68 major cities must spend over 30% of their annual income on the cost of home ownership.
- In some affordable markets nationwide, homeowners spend under $1,000 per month on mortgage payments and property taxes.
- Homes are staying on the market for longer, and combined with lower interest rates, many markets offer more favorable conditions for potential buyers than the competitive seller’s market of 2022.
The 5 Least Affordable Housing Markets
1. Miami, FL
Miami is the least affordable housing market in March. With a median household income of $46,211, potential homeowners can expect to spend 81.62% of their income on a median-priced property that costs $585,000.
Miami residents still have to heavily weigh the cost of homeownership should they decide to purchase a property. However, lower interest rates and decreasing home prices signal the start of a cooling market that may inspire more potential buyers in the coming months.
2. Los Angeles, CA
Los Angeles comes in second on our unaffordable list. In this city, residents can expect to dedicate 81.35% of their income toward housing costs, equating to $4,844.78 monthly.
The city hosts many high-value properties, overall making homeownership unattainable for many potential buyers. In a response to lower activity levels, some sellers are now playing into buyers’ hands and dropping their prices. With homes sitting on the market for longer, buyers have more power than they did last season.
3. Newark, NJ
Newark ranks as the third least affordable housing market in March. The median purchase price of a house in this city is $389,000, and residents spend 74.11% of their income on mortgage and property tax payments.
While low inventory affects many housing markets nationwide, Newark developers are attempting to combat the issue with new housing complexes city-wide. As the city works to increase housing options and decrease demand, potential buyers may be able to secure property with a less expensive price tag down the line.
4. New York, NY
New York City has the fourth least affordable housing market in the country. New York City residents generate a median household income of $70,118, spending 68.90% of their money on housing costs.
New York City housing prices have decreased since their record highs of 2022, yet housing remains a dream for many residents citywide. Even so, there are still opportunities for those looking to purchase property below market rates, and buyers can secure lower financing options than last year now that interest rates are slightly falling.
5. Hialeah, FL
Hialeah is the fifth least affordable housing market nationwide. Property costs a median purchase price of $440,000 in this city, but residents should expect to spend $2,277.15 a month on housing costs like mortgage payments and property taxes.
Hialeah is the second city on the list that resides in Florida. Similar to Miami, buyers have hopefully passed the least advantageous purchasing period in their city. As the year progresses and sales prices potentially fall, more room emerges for securing homes.
The 5 Most Affordable Housing Markets
1. Detroit, MI
Detroit has the most affordable housing market this month. In this city, the median purchase price for a home is $85,000, and residents spend 17.01% of their income on housing costs.
The city’s housing inventory is on the rise, providing more options for buyers and shifting the power away from sellers. Though interest rates are still high nationwide, lower housing prices make homeownership more affordable for those looking to purchase properties. Year over year, homes are sitting on the market for less time and selling for below their asking price. Those considering purchasing property in Detroit should consider their next steps to take advantage of the city’s current housing market.
2. Wichita, KS
Wichita has the second most affordable housing market nationwide. Residents generating a median of $61,245 will only spend 18.73% of their income on mortgage payments and property taxes.
Wichita’s long-lasting seller’s market relied on high-interest rates and low inventory, but the affordable city may lean further toward the favor of buyers this year. With new zoning changes, the city plans to add more single-family homes to the city to increase inventory and provide buyers with more purchasing opportunities.
3. Cleveland, OH
Cleveland hosts the third most affordable housing market. Homes in this city cost a median of $109,000, and residents will spend $651.35 per month on the cost of homeownership.
Available inventory continues to increase, and closed deals decrease throughout Cleveland, indicating a shift into a buyer’s market citywide. Buyers now have more purchasing power and can use lower interest rates to finance their purchases.
4. St. Louis, MO
St. Louis residents generate a median household income of $51,539 and direct 21.99% of their income toward housing, making it the fourth most affordable market.
Decreasing sales prices around the city may encourage buyers who felt pushed out of last year’s competitive market. Those who waited to buy can now seize lower interest rates and purchase prices to afford the cost of homeownership.
5. Fort Wayne, IN
Fort Wayne has the fifth most affordable housing market in the country. Homes go for a median of $209,950 in this city, and residents can expect to spend $1,116.21 per month on mortgage payments and property taxes.
The city aims to further help cool its housing market with new construction for potential homeowners. Officials recognize that as the millennial generation grows into homeownership, they’ll need more inventory to help balance supply and demand.
Housing Markets to Watch in March
Boise, ID
Boise homeowners watched home prices increase throughout the COVID-19 pandemic as more employees worked remotely and moved to less expensive housing markets. As one of the country’s “Zoomtowns,” this city currently ranks as the 35th most expensive housing market nationwide. The median purchase price for a home is $465,000, and residents spend 38.05% of their income on homeownership.
As more companies return to the office and limit remote working capabilities, Zoomtowns like Boise are now watching home prices slightly decrease. However, the city currently battles with low inventory and a decreasing number of approved housing permits. With lower inventory and lower demand, time will tell how this housing market responds to 2023 conditions.
Seattle, WA
Seattle hosts the 22nd least affordable housing market nationwide, where the median purchase price for a home sits at $760,000. City residents generating a median income of $108,782 can expect to spend 43.44% of their earnings on housing costs.
Though this city hosts one of the highest median salaries nationwide (Fremont, California, takes first place with a median income of $153,364), high housing prices still make homeownership unaffordable for many potential buyers. When interest rates drastically climbed in 2022, many buyers pulled out of the market to avoid high mortgage payments. As mortgage rates slowly decline, there may be more room for buyers in this market to purchase a property.
Kansas City, MO
Kansas City has an affordable housing market compared to the rest of the country, ranking 91st in March. Homes go for a median purchase price of $235,000, where residents only spend 24.65% of their income on mortgage payments and property taxes.
While the city’s market also witnessed increasing housing prices and interest rates last year, their market does not experience as strong volatility as coastal cities. High-interest rates deferred potential buyers last year and forced sellers to reevaluate their strategies. Now, homes in Kansas City stay on the market for longer, and buyers no longer feel pressure to waive contingencies or put in offers significantly above the asking price.
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: February 2022
- RealtyHop Housing Affordability Index: January 2022
- RealtyHop Housing Affordability Index: December 2022
