Housing

Most Affordable Housing Market In America

Douglas A. McIntyre

Published: December 4, 2022 12:13 pm

The housing market’s days of increasing prices every month are over. A two-year period when home prices rose by 20% each month year over year has been undermined by high mortgage rates that have doubled to about 6%. Affordability, defined mostly by the relationship between median income and median home prices, becomes a huge burden when mortgage rates increase monthly mortgage payments by hundreds of dollars. Based on these yardsticks, Toledo stands out as the most affordable market.

The Federal Reserve Bank of Atlanta keeps a database it calls the Metro Are Home Ownership Affordability Index. It measures “ the median-income household (needed) to absorb the estimated annual costs associated with owning a median-priced home.”

Across 100 markets, the index gives a score of 100 for an affordable market. In September, only one market was above that level. Toledo had a score of 100.6. The market with the worst affordability was Los Angeles at 33.1.

The data does not show why Toledo is so affordable. Home prices have been pushed down for decades as the city lost almost half its population. Demand for homes cratered. For the same reason, cities like St Louis and Dayton are also affordable compared to most of the rest of the nation.

Home affordability became a major issue two years ago. In some markets, prices rose 30% each month year over year. . Incomes did not rise as much in any market. Some people turned to renting and found rents had started to rise as fast as home prices. The dilemma was that the ability of people to pay for other parts of their lives eroded. They had to stretch their budgets simply to keep a roof over their heads.

The home affordability problem has turned into a race. Home prices are rising slower than they did early this year. That should improve affordability. Mortgage rates at 6% cut into affordability. Interest rates are not likely to fall while the Fed pushes them higher. This leaves a drop in home prices as the only way affordability can improve.