With U.S. home prices soaring 19.2% in the 12 months through January, it’s clearly difficult for non-wealthy people to afford a home.
“There has been a strong trend away from affordability,” according to a study of world housing markets by the U.S. Urban Reform Institute and Canada’s Frontier Centre for Public Policy.
“The number of severely unaffordable markets rose 60% in 2021 compared to 2019, the last prepandemic year.”
In the U.S., 27 housing markets ranked as severely unaffordable in 2021, nearly double the 14 of 2019, the study says.
It defines severely unaffordable as markets where the median home price is at least 5.1 times the median income. The study calls that multiple the affordability rating.
California has the largest concentration of severely unaffordable markets, with four of the nation’s five highest-cost markets relative to incomes. Those cities are San Jose (with an affordability rating of 12.6), San Francisco (11.8), Los Angeles (10.7) and San Diego (10.1). Honolulu came in at 12.
Other severely unaffordable markets include Miami (8.1), Seattle (7.5), Riverside-San Bernardino (7.4), Denver (7.2), New York (7.1), Boston (7.0) and Portland (7.0).
Most Affordable: Pittsburgh
The most affordable U.S. housing markets are Pittsburgh (with median multiple of 2.6), Oklahoma City (3.3), Rochester, N.Y., (3.3), St. Louis (3.6), Cleveland (3.7), Cincinnati (3.8), Buffalo, N.Y., (3.9), Kansas City, Mo., (4.0), Louisville, Ky., (4.0) and Tulsa, Okla. (4.0).
Those cities have the most affordable housing markets in the world, along with Edmonton, Alberta (3.6), and Calgary, Alberta (4.0).
The most expensive global housing markets are Hong Kong (23.2), Sydney (15.3), Vancouver (13.3), San Jose and Melbourne (12.1).
Most of the recent housing news in the U.S. has been dismal for buyers with the soaring home prices, rising mortgage rates and limited inventory putting the kibosh on potential purchases.
Housing Starts Rise
Here’s some good news. Housing starts unexpectedly rose in March -- 0.3% from February to the highest level since 2006. That’s a seasonally adjusted annual rate of 1.79 million. Apartment/condo buildings led the way.
Building permits also gained in March -- 0.4% from February to a seasonally adjusted annual rate of 1.87 million.
Homebuilders are nonetheless pessimistic. The National Association of Home Builders/Wells Fargo Housing Market Index of homebuilder confidence fell to a seven-month low in April.
“Rapidly rising interest rates combined with ongoing home price increases and higher construction costs continue to take a toll on builder confidence and housing affordability,” the NAHB said in a statement.
