While there are many deals to be found in the current housing market – overall prices are down 30 percent from their peak in 2006 and mortgage rates are at record-lows – many areas of the U.S. housing market remain largely impenetrable for middle class Americans, according to a new study out today from Interest.com.
The report found that in 11 of the 25 largest metropolitan areas in the country, a median-income household is unable to afford a median-priced home. The least affordable cities included New York, San Diego, San Francisco, Los Angeles and Miami – the combined populations of which add up to approximately 14.5 million people.
Least Affordable Housing
|City||Affordability Grade||Paycheck Power Rating*|
“Despite all of the talk about how homes are more affordable than they have been in decades,” says managing editor of Interest.com, Mike Sante, in the report, “buying a home is still a big challenge for many American households.”
Home affordability – a major concern before the housing crash – has received little attention in the current market. But with stagnant wages and rising expenses, many Americans are finding even lower-housing prices unaffordable.
In San Diego, for example, many international real estate investors are buying up local property, which is further inflating home values. Donna Sanfilippo, president of the San Diego Association of Realtors, says the city has the lowest amount of inventory on the market since 2009. “We’re seeing a lot of cash deals – 27 percent of all multiple listing service deals,” he says in the report. “Investors are coming back into the market.”
In San Francisco, the average price of a home is the highest in the country at $552,600 – difficult to afford for even those who earn above the median wage of $71,975. And in New York, also known for higher home prices, taxes are more than three times the national average.
In addition to median home prices and income, the study also took into account average property taxes, homeowners’ insurance premiums, and consumer debt and mortgage rates to come up with the list. Data came from the U.S. Census Bureau, National Association of Realtors, National Association of Insurance Commissioners, and Experian, a major credit reporting agency.
"In many communities there is a fundamental disconnect between the income families have and the costs of buying a home," says Jeffrey Lubell, executive director of the Washington-based think tank, the Center for Housing Policy, in the report. "Falling house prices haven't solved the problem. They've helped, but they haven't solved it."
*Paycheck Power Rating is the percent the median income falls short of the income required for a median-priced home.