There are just six cities where the median-priced home is affordable for median-income earners, per FOX.
New research from Clever Real Estate reveals that in 44 of the largest 50 metropolitan areas in the U.S., housing prices are too high to be considered affordable for households earning the median income.
An "affordable" home for the typical family is defined as one that costs no more than 28% of the household's annual income. However, for most cities, this threshold is insufficient to purchase a median-priced home at the local median income, even with a 20% down payment.
Only six cities have median-priced homes that are affordable for median-income earners:
- Pittsburgh
- Cleveland
- St. Louis
- Memphis, Tennessee
- Indianapolis
- Birmingham, Alabama
For example, in Pittsburgh, the median home price is around $199,573. With a 20% down payment, the mortgage, including taxes and insurance, amounts to approximately $1,398 per month. To afford this, an individual needs to earn at least $59,919 annually, which is below Pittsburgh's median household income of $70,607.
However, the vast majority of cities remain unaffordable, with a significant disparity between the suggested income needed to afford a house and the actual median income.
Cities like Los Angeles, San Jose, San Diego, San Francisco, New York, Miami, and Riverside are particularly challenging for first-time buyers.
Los Angeles stands out as the least affordable city, requiring an income of $249,471 to comfortably afford a median-priced home, while the actual median income in the city is less than half of that, at $87,743.
Several factors contribute to this affordability crisis. A long period of underbuilding has led to a shortage of homes, worsened by rising mortgage rates and expensive construction materials.
The increase in mortgage rates over the past few years has created a "golden handcuff" situation in the housing market. Sellers who secured record-low mortgage rates of 3% or less during the pandemic have been reluctant to sell, further limiting supply and reducing options for potential buyers.
