Housing Affordability Hits 2 Extremes

A look at housing affordability across the country paints a picture of two stark contrasts, one very high and the other very low, according to realtor.com®’s new Mortgage Affordability Report, which gauged affordability by culling data from 25 of the largest housing markets.

Gauging Affordability

More Than Half of Listings Are ‘Affordable’

Affordability Still Plagues Many Households

What You Need to Earn to Buy in 10 Cities

Indeed, the most affordable housing market this year: Detroit, where home buyers likely would only need 13.2 percent of the median income there to buy a home. On the other end of affordability is San Francisco, where buyers would need 72 percent of their median income to afford a home there — more than double the 28 percent mortgage-to-income ratio threshold often considered financially healthy.

“Over the last 10 years, we have seen marketplace gyrations ranging from bubble to burst to recovery to stabilization, and we are now seeing a market of extremes on the affordability front,” says Jonathan Smoke, realtor.com®’s chief economist. “Buyers, especially first-time home buyers, might feel more motivated as the overall market continues to improve, and this report provides buyers with local insight that is both informative and instructive.”

Nationwide, by the end of this year, households will likely need to spend 27.6 percent of the median family household income of $55,533 to purchase a median priced home with a 30-year fixed-rate mortgage, according to the report. Rents are expected to require 29.5 percent of income.

“Affordability is greatly impacted by mortgage rates, so waiting a year to buy as affordability declines may force home buyers to consider alternative options such as hybrid-adjustable mortgages that have lower rates,” Smoke says.

The 5 Most Affordable Markets for 2015

Realtor.com®’s new report finds the following markets are the most affordable (ranked by lowest predicted mortgage-to-income ratio with a 30-year fixed-rate mortgage):

1. Detroit-Warren-Dearborn, Mich.
Median income (2015): $53,186
Mortgage-to-income ratio (2015): 13.2%

2. St. Louis, Mo.-Ill.
Median income: $57,255
Mortgage-to-income ratio: 18.1%

3. Cleveland-Elyria, Ohio
Median income: $49,965
Mortgage-to-income ratio: 18.8%

4. Atlanta-Sandy Springs-Roswell, Ga.
Median income: $56,557
Mortgage-to-income ratio: 19.8%

5. Pittsburgh
Median income: $54,264
Mortgage-to-income ratio: 20.1%

The 5 Least Affordable Markets for 2015

On the other hand, these markets were found to be the least affordable (ranked by highest predicted mortgage-to-income ratio with a 30-year fixed-rate mortgage):

1. San Francisco-Oakland-Hayward, Calif.
Median income (2015): $78,355
Mortgage-to-income ratio (2015): 72%

2. San Diego-Carlsbad, Calif.
Median income: $64,392
Mortgage-to-income ratio: 56.9%

3. Los Angeles-Long Beach-Anaheim, Calif.
Median income: $62,037
Mortgage-to-income ratio: 50.7%

4. New York-Newark-Jersey City, N.Y.-N.J.-Pa.
Median income: $67,968
Mortgage-to-income ratio: 46.6%

5. Miami-Fort Lauderdale-West Palm Beach, Fla.
Median income: $49,121
Mortgage-to-income ratio: 42.2%

Source: Move Inc.

 

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