Lending markets

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 soared in recent years, with CoreLogic revealing in its latest report that home prices rose 20.9% year-over-year in April 2022, marking the 123rd month of rising prices . Mortgage interest rates have also risen, with some pros saying we’ll see more to come (you can see the lowest mortgage rates you could 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 record low affordability seen at the top of the market in 2006.”

These affordability issues have no doubt caused many buyers to ask themselves: how can I afford to buy a home in my hometown? For many, the answer is: you can’t. But we dug into the Black Knight data to look for metro areas where housing affordability is actually higher now than it has been based on historical averages.

Only three out of 100 markets are more affordable for residents today than they were on average from 1995 to 2003: Chicago; McAllen, TX; and Des Moines. (The company measures housing affordability using the payment-to-income ratio, which examines the share of median metro area income needed to make the monthly payment of principal and interest on a home purchase in average price using 20% ​​down payment, 30 year fixed mortgage.)

Black Knight also looked at areas with the lowest payment-to-income ratio, indicating that housing is relatively affordable for residents. Here are the results:

10 of the most affordable major housing markets

Town Payment to income ratio

Milwaukee, Wis.

24.5%

Louisville, Kentucky

23.9%

Pittsburgh, Pennsylvania

23.3%

Chicago, IL

23.3%

Rochester, NY

23.2%

Cleveland, Ohio

22.8%

Cincinnati, Ohio

22.8%

Kansas City, Missouri

22.4%

Detroit, Michigan

22.1%

St. Louis, Missouri

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 supplied, says Danielle Hale, chief economist at Realtor.com. “The Illinois markets, in particular, have a lot of local home buyers instead of attracting home buyers from outside the area,” says Hale. (You can see the lowest mortgage rates you could qualify for here.)

You will notice a big difference between the payment-to-income ratios of the most and least affordable metro areas. “So far, the affordability gap remains large between the most expensive and the least expensive markets,” says Bankrate analyst Jeff Ostrowski. “On the supply side, coastal markets have geographic constraints on buildable land compared to inland cities where suburban development can continue to expand outwards. More expensive markets also tend to impose stricter regulations on new construction than less expensive metropolitan areas,” says Ostrowski.

10 of the least affordable major housing markets

Town Payment to income ratio

Los Angeles, CA

69.6%

San Jose, California

65.0%

San Diego, California

63.8%

San Francisco, California

58.1%

Las Vegas, Nevada

50.8%

Seattle, WA

48.7%

Riverside, California

45.8%

Sacramento, California

44.9%

Phoenix, Arizona

44.5%

Miami, Florida

44.2%

“Even relative to income, housing in these big cities is expensive. This is at least in part because these areas are attractive and attract not only home buyers, but also investors and second home buyers who are looking for the jobs, culture and character that these cities offer. Buyers are willing to pay extra to be in these areas,” says Hale.

Additionally, “all markets with the least affordable housing experienced strong population growth and therefore greater demand for housing, while Midwestern markets did not have as many people moving in, which helped keep relatively affordable homes,” says Zillow economist Nicole Bachaud. .