Soaring home prices, limited inventory and elevated mortgage rates have exacerbated the housing affordability crisis in many housing markets when viewed in the context of household incomes, which have remained generally stagnant.
In a new study, Zillow compiled related metrics to measure the affordability gap in terms of how much more income a household would have to make over the median to be able to afford a typical home in any given housing market. The same study shows where housing is the most affordable.
For the United States as a whole, a household making the median income of $82,168 would need a $17,670 annual raise to be able to afford monthly payments, assuming a hefty 20% downpayment. That would require $73,000 in household savings.
If the downpayment shrinks to 10%, the annual raise needed jumps to $17,670.
“Affordability remains a steep hill to climb, especially for first-time buyers,” said Zillow economist Kara Ng in a statement. “While the financial bar has gotten higher, we’re also in the middle of the most buyer-friendly spring since before the pandemic for those who can make the finances work. Inventory is up, prices are softening, and sellers are negotiating. To make homeownership more broadly accessible, though, we need lasting solutions, starting with policies that allow more homes to be built in the right places.”
Breaking the numbers out by metropolitan area reveals that there are still areas that are affordable. Five housing markets require a negative raise, which means homebuyers don’t need a raise to be able to afford a typical home.
Pittsburgh leads the way in that regard, as a household making the median income has $11,244 to spare annually after accounting for a monthly mortgage payment at home prices in the metro area.
St. Louis ($4,897), Cincinnati ($4,396), Detroit ($1,804) and Chicago ($187) are the other four housing markets with room to spare in annual income after accounting for a mortgage payment.
The other end of the spectrum shows just how cartoonishly unaffordable some metro areas are. While which housing markets are the least affordable won’t surprise you, the magnitude at which they’re unaffordable is shocking.
In San Francisco, for a household making the median income of $135,311 to afford a typical home at a price of $1,165,757, they would need a whopping $165,566 raise, more than double what they are already making. The needed raise is in the six figures for Los Angeles ($149,375) and San Diego ($128,954) as well.
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