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 gains. Mortgage rates are up, too, with some pros saying we’ll see more in the future (you can see the lowest mortgage rates you might qualify for here.) For their part, mortgage tech and data provider Black Knight concluded in a recent report: “Housing is now within a whisper of the record low affordability seen at the peak of the market in 2006.”

No doubt, these affordability issues have led many homebuyers to ask: How can I buy a home in my city? For many, the answer is: You can’t. But we looked at data from the Black Knight to look for urban areas where housing affordability is greater now than they were based on historical averages.

Only three of the 100 markets are more affordable for residents now than they were on average from 1995-2003: Chicago; McAllen, Texas; and Des Moines. (The company measures housing affordability using the pay-to-income ratio, which considers the share of average income in a metro area needed to pay off the monthly principal and pay interest on the purchase of a median-priced home using a maximum of 20%, a 30-year fixed-mortgage .)

Black Knight also looked at areas where the pay-to-income ratio was low – an indication that housing is relatively affordable for residents. Here are the results:

10 of the most affordable major housing markets

city

Pay-to-income ratio

Milwaukee, Wisconsin

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, Missouri

22.4%

Detroit, Michigan

22.1%

St. Louis, Missouri

21.4%

Realtor.com’s chief economist, Danielle Hill, says housing in areas like St. Louis, Cincinnati, Chicago and Louisville tends to be affordable, in part because these markets operate more locally. “Illinois markets, in particular, have a lot more local home shoppers than attract homebuyers from outside the area,” Hill says. (You can see the lowest mortgage rates for which you may qualify here.)

You’ll notice a big difference between the pay-to-income ratios from the more affordable and less expensive metro areas. “So far, the affordability gap remains wide between the more expensive and the cheapest markets,” says Jeff Ostrowski, analyst at Bankrate. “On the supply side, coastal markets face geographic constraints on buildable land compared to inland cities where suburban development can continue to expand outward. More expensive markets also tend to have stricter regulations on new construction than less expensive urban areas,” says Ostrovsky. .

10 Major Least Affordable Housing Markets

city

Pay-to-income ratio

Los Angeles, California

69.6%

San Jose, California

65.0%

San Diego, California

63.8%

San Francisco, California

58.1%

Las Vegas, Nevada

50.8%

Seattle, Washington

48.7%

Riverside, California

45.8%

Sacramento, California

44.9%

Phoenix, Arizona

44.5%

Miami, FL

44.2%

“Even compared to income, housing in these megacities is expensive. This is at least in part because these areas are desirable and attract not only homebuyers, but also investors and second homebuyers looking for the jobs, culture and cache that these cities offer,” Hill says. : “Shoppers are willing to pay a premium to be in these areas.”

Furthermore, “None of the markets with less expensive housing has seen strong population growth and therefore greater housing demand, while Midwest markets have not received as many people moving into them, which helps keep homes relatively affordable,” she says. Nicole Baswood, chief economist at Zillow.

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