5 most and least affordable metro areas across the US
By creating a housing shortage, the coronavirus delivered a blow to housing affordability. However, in a countertrend that has softened the blow to buyers’ budgets, the pandemic drove mortgage rates to record lows.
Now, though, mortgage rates are rising, and home prices have soared at a record pace over the past year. The National Association of Home Builders estimates the median price of all new and existing homes sold in the United States rose to a record $360,000 in the final three months of 2021.
As a result of skyrocketing prices, it’s getting harder for Americans to afford homes. Just 54.2% of homes sold during the fourth quarter were affordable to families earning a typical income. That number stood at 66% in the first quarter of 2020, the start of the pandemic, according to the NAHB/ Wells Fargo Housing Opportunity Index.
Affordability factors
The builders’ index looks at three variables — incomes, home prices and mortgage rates. The affordability study shows nationwide home prices remain high.
In a trend that tightens the affordability squeeze, average mortgage rates rose to 3.16% in the fourth quarter, up from 2.95% in the third quarter.
While falling mortgage rates had created tailwinds for affordability, that trend has reversed. And there’s a major headwind — home prices are rising much faster than wages. Median incomes rose just 2% from 2020 to 2021, compared with a double-digit jump in home prices, according to the index.
5 most affordable areas
Lansing, Michigan: As a result of modest home prices, 90.6% of all new and existing homes sold in the fall were affordable to families earning the area’s median income of $79,100. The median home price was $155,000 in the fourth quarter of 2021, the builders’ index says.
Scranton-Wilkes BarreHazleton, Pennsylvania: Wages here are below national levels, but so are home prices — the median sale price was $150,000 in the fourth quarter. As a result of rock-bottom prices, 88.5% of all new and existing homes sold in October, November and December 2021 were affordable to families earning the area’s median income of $70,600.
Pittsburgh: This metro area has a median family income of $84,800 and a median home price of just $166,000. As a result, 88.4% of homes were affordable for typical earners.
Indianapolis: This metro area has a median family income of $81,600 and a median home price of $215,000. As a result, 87.6% of homes were affordable for typical earners.
Akron, Ohio: With a median family income of $83,300 and a median home price of $165,000, 86.5% of homes were in reach of median-income families.
5 least affordable areas
Los Angeles-LongBeach-Glendale: In a market with a median home price of $801,000, LA’s median income of just $80,000 doesn’t go far. As a result, only 7.5% of homes were affordable for typical families.
Anaheim-Santa Ana-Irvine: The typical family makes $106,700 this year. But home prices are higher, at a median of $930,000. That means just 11.5% of homes are in reach of average families.
San Francisco-Redwood City-South San Francisco: Incomes are high here — the median is $145,400. Prices are even higher — the typical home went for $1.5 million. That translates to just 13% of homes sold during the autumn months falling in the range of affordability for families earning the area’s median income.
San Diego-Carlsbad:
San Diego has a median family income of $95,100 and a median home price of $750,000, translating to just 13.9% of homes falling in the typical buyer’s budget.
Ventura, California:
This area’s median family income is a healthy $98,800, but the typical home sold for $749,000. That meant 19.3% of homes sold were affordable.