Real Estate

Middle-Class Affordability is Declining for Homebuyers in 70% of America’s Largest Cities

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More than two-thirds of the 53 biggest U.S. housing markets saw the share of homes affordable to the middle class decrease between 2014 and 2019, according to an analysis by Redfin. Affordable homes were more likely to be hard to find in many of the biggest coastal cities such as New York, Los Angeles, Seattle and San Francisco.

Combined with the worst housing shortage in at least a decade and a sharp increase in competition among homebuyers, the shrinking share of affordable homes is making it an especially difficult time to be a middle-class homebuyer.

“In many expensive coastal cities, home ownership is effectively out of reach for middle-class families,” said Redfin chief economist Daryl Fairweather. “In these cities it is nearly impossible for a family making the median income to become a homeowner because prices have gotten so high. But the good news is that there are still many places in the Midwest and South where a middle class family can afford a home without breaking the bank. Over the next decade, we will see more Americans leave expensive coastal cities for places where homeownership is affordable. The cities that will see the most growth will be those that have affordable housing and strong job markets.”

For this report Redfin analyzed the share of homes sold that the middle class could afford by taking the median household income for each metro area and then calculating the maximum home price that resulted in a mortgage payment of 30% or less of the household’s monthly income, assuming a 5% down payment and the average 30-year fixed-rate mortgage interest rate from four weeks prior to each home sale.

The five markets with the highest percentage of homes affordable to these middle-class households were Rochester, NY (90.3%), Hartford, (89.5%), Cleveland (84.7%), Buffalo (84.2%) and Grand Rapids, MI (81.7%).

The five markets with the lowest percentage of homes affordable to the middle class were all in California, and in the bottom four less than 20% of homes were affordable to the middle class. Los Angeles had the fewest homes affordable to the median household income (10.6%) followed by San Jose (11.1%), San Diego (16.8%), San Francisco (19.1%) and Riverside (39.1%). The other areas where fewer than 50% of homes were affordable to the middle class were Sacramento (43.4%), Seattle (43.9%), Portland, OR (45.5%), Boston (46.0%), Denver (46.1%), New York (46.9%), Las Vegas (47.2%) and Miami (49.6%).

Share of Homes Sold in 2019 Affordable to Median-Income Households, by Metro Area

Metro Area Percent of Homes Sold in 2019 Affordable to Median Income Household Median Household Income, 2019 Affordable Home Threshold, 2019 Median Home Sale Price, 2019
Rochester, NY 90.3% $63,593 $326,000 $150,000
Hartford, CT 89.5% $83,580 $425,000 $224,000
Cleveland, OH 84.7% $60,180 $307,000 $155,000
Buffalo, NY 84.2% $56,952 $291,000 $159,120
Grand Rapids, MI 81.7% $65,458 $336,000 $210,000
Cincinnati, OH 81.4% $63,852 $327,400 $185,000
St. Louis, MO 81.1% $64,033 $326,000 $186,500
Oklahoma City, OK 80.5% $58,737 $301,290 $183,900
Indianapolis, IN 79.9% $62,514 $320,000 $190,000
Pittsburgh, PA 79.4% $60,923 $313,000 $175,000
Minneapolis, MN 79.0% $82,396 $423,000 $280,033
Detroit, MI 78.6% $62,691 $322,779 $186,500
Kansas City, MO 77.9% $68,220 $351,000 $225,000
Columbus, OH 75.9% $64,341 $330,000 $218,000
Baltimore, MD 75.8% $83,666 $430,000 $285,000
Atlanta, GA 75.7% $73,802 $380,000 $249,000
Virginia Beach, VA 75.5% $66,981 $340,000 $237,000
Philadelphia, PA 74.9% $72,991 $375,000 $242,000
Chicago, IL 74.7% $73,198 $376,000 $246,000
Louisville, KY 73.1% $57,531 $295,560 $199,000
Raleigh, NC 72.7% $77,846 $400,667 $291,000
Birmingham, AL 72.1% $59,916 $307,500 $210,095
Houston, TX 71.8% $67,026 $345,066 $245,000
Milwaukee, WI 71.2% $61,862 $317,200 $225,000
Richmond, VA 70.5% $67,773 $345,000 $259,900
Dallas, TX 70.0% $71,571 $367,100 $279,000
Jacksonville, FL 69.6% $61,807 $318,229 $235,000
San Antonio, TX 67.5% $57,990 $298,000 $231,950
Austin, TX 67.5% $80,182 $411,252 $316,776
Orlando, FL 66.6% $62,356 $321,000 $256,000
Memphis, TN 66.4% $49,700 $254,780 $185,000
Tucson, AZ 66.3% $55,584 $285,000 $225,300
Washington, D.C. 66.0% $104,754 $539,220 $414,000
Tampa, FL 65.6% $57,752 $296,000 $234,000
Phoenix, AZ 64.8% $67,487 $347,000 $280,000
Charlotte, NC 64.3% $62,994 $324,000 $259,900
Providence, RI 60.0% $64,940 $334,000 $286,000
Salt Lake City, UT 59.6% $76,019 $390,000 $340,000
Nashville, TN 58.8% $67,960 $349,990 $300,000
New Orleans, LA 56.2% $50,075 $257,000 $225,733
Miami, FL 49.6% $58,449 $301,000 $287,000
Las Vegas, NV 47.2% $56,963 $293,000 $285,000
New York, NY 46.9% $81,716 $420,130 $419,000
Denver, CO 46.1% $82,418 $424,000 $415,000
Boston, MA 46.0% $91,837 $472,000 $475,000
Portland, OR 45.5% $79,454 $409,000 $402,000
Seattle, WA 43.9% $94,093 $484,000 $498,400
Sacramento, CA 43.4% $78,786 $405,000 $410,000
Riverside, CA 39.1% $69,566 $357,500 $377,000
San Francisco, CA 19.1% $114,458 $588,000 $900,000
San Diego, CA 16.8% $82,059 $421,399 $580,000
San Jose, CA 11.1% $132,362 $675,000 $1,100,000
Los Angeles, CA 10.6% $75,228 $387,000 $655,000

Although more than half of the homes sold were affordable to households earning the local median income in most markets in 2019, the typical housing market saw a decline in the share of affordable homes between 2014 and 2019, with a median decline of 2.8 percentage points across metro areas with populations of 1 million or more.

The largest decline was in Las Vegas, which saw the share of homes affordable to the middle class fall 25 percentage points over the five year period, from 72.4% affordable in 2014 to just 47.2% in 2019.

“Homebuyers in Las Vegas today often get frustrated when they see how much more they will have to pay to get the kind of home they expect,” said Las Vegas Redfin agent Tommy Boudreau. “Multiple offers are becoming more common, and buyers are finding it difficult to adjust to how fast the market has changed here. They compare today’s market to when they purchased a few years ago and have a hard time accepting that they will need to pay a lot more to get what they want.”

The second-largest decline in the share of affordable homes was in Denver (-17 points). The only other area that saw more than a 10-point drop was Salt Lake City (-11 points). While 15 metros saw an increase in the percentage of homes affordable to the middle-class, most were small, with the highest increase just 5.1% in both Birmingham, AL and Baltimore. Mortgage interest rates were slightly lower in 2019 than in 2014, which helped improve affordability somewhat.

Change in Share of Homes Affordable to Median-Income Households, 2014 to 2019, by Metro Area

Metro Area Percent of Homes Sold in 2014 Affordable to Median Income Household Percent of Homes Sold in 2019 Affordable to Median Income Household Percentage Point Change, 2014 to 2019 Median Home Sale Price, 2014 Median Home Sale Price, 2019
Las Vegas, NV 72.4% 47.2% -25.2% $180,900 $285,000
Denver, CO 62.7% 46.1% -16.7% $272,000 $415,000
Salt Lake City, UT 70.9% 59.6% -11.3% $230,000 $340,000
New Orleans, LA 65.2% 56.2% -9.0% $174,900 $225,733
Seattle, WA 52.9% 43.9% -9.0% $325,989 $498,400
Memphis, TN 74.4% 66.4% -8.0% $140,000 $185,000
Miami, FL 57.2% 49.6% -7.7% $198,000 $287,000
Portland, OR 52.9% 45.5% -7.4% $279,000 $402,000
Tampa, FL 72.0% 65.6% -6.4% $149,900 $234,000
Providence, RI 66.1% 60.0% -6.1% $215,000 $286,000
Riverside, CA 44.5% 39.1% -5.4% $279,000 $377,000
Nashville, TN 64.2% 58.8% -5.4% $200,513 $300,000
Sacramento, CA 48.3% 43.4% -5.0% $292,000 $410,000
Orlando, FL 71.4% 66.6% -4.8% $165,000 $256,000
Columbus, OH 80.7% 75.9% -4.8% $157,000 $218,000
San Jose, CA 15.8% 11.1% -4.7% $737,050 $1,100,000
San Antonio, TX 72.3% 67.5% -4.7% $180,000 $231,950
San Diego, CA 21.4% 16.8% -4.7% $440,000 $580,000
Los Angeles, CA 15.2% 10.6% -4.6% $494,000 $655,000
Grand Rapids, MI 86.1% 81.7% -4.4% $139,900 $210,000
Charlotte, NC 68.7% 64.3% -4.3% $186,000 $259,900
Detroit, MI 82.8% 78.6% -4.1% $118,500 $186,500
Dallas, TX 73.7% 70.0% -3.7% $194,900 $279,000
Phoenix, AZ 68.2% 64.8% -3.4% $195,000 $280,000
Louisville, KY 76.5% 73.1% -3.3% $150,000 $199,000
Milwaukee, WI 74.5% 71.2% -3.2% $170,000 $225,000
Boston, MA 48.7% 46.0% -2.8% $368,000 $475,000
Tucson, AZ 68.9% 66.3% -2.6% $165,000 $225,300
Richmond, VA 72.4% 70.5% -1.9% $210,000 $259,900
Cincinnati, OH 83.3% 81.4% -1.9% $139,000 $185,000
Jacksonville, FL 71.3% 69.6% -1.7% $167,500 $235,000
Buffalo, NY 85.9% 84.2% -1.7% $122,500 $159,120
San Francisco, CA 20.5% 19.1% -1.5% $660,000 $900,000
Minneapolis, MN 80.4% 79.0% -1.4% $205,000 $280,033
Kansas City, MO 79.1% 77.9% -1.2% $165,000 $225,000
St. Louis, MO 82.0% 81.1% -0.9% $149,000 $186,500
Indianapolis, IN 80.6% 79.9% -0.7% $140,825 $190,000
Oklahoma City, OK 80.5% 80.5% 0.0% $155,000 $183,900
Pittsburgh, PA 78.7% 79.4% 0.7% $142,000 $175,000
Cleveland, OH 83.4% 84.7% 1.3% $120,000 $155,000
Hartford, CT 87.9% 89.5% 1.6% $181,000 $224,000
Austin, TX 65.9% 67.5% 1.6% $240,000 $316,776
Virginia Beach, VA 73.9% 75.5% 1.6% $202,500 $237,000
Raleigh, NC 70.6% 72.7% 2.0% $219,615 $291,000
Houston, TX 69.6% 71.8% 2.3% $199,900 $245,000
New York, NY 44.1% 46.9% 2.8% $348,000 $419,000
Chicago, IL 71.9% 74.7% 2.8% $190,000 $246,000
Rochester, NY 87.4% 90.3% 3.0% $125,000 $150,000
Washington, D.C. 63.0% 66.0% 3.0% $363,020 $414,000
Atlanta, GA 72.6% 75.7% 3.1% $177,000 $249,000
Philadelphia, PA 70.7% 74.9% 4.2% $210,000 $242,000
Baltimore, MD 70.7% 75.8% 5.1% $242,500 $285,000
Birmingham, AL 67.0% 72.1% 5.1% $167,500 $210,095

Methodology

To calculate the share of homes sold affordable to the median-income household we took the median household income, then calculated the maximum home price that could be purchased with a mortgage payment that takes no more than 30% of income, assuming a 5% down payment and the average 30-year fixed-rate mortgage interest rate from four weeks prior to each home sale. The share of homes affordable is the percent of homes sold during the year with a price at or below that maximum home price.

The post Middle-Class Affordability is Declining for Homebuyers in 70% of America’s Largest Cities appeared first on Redfin | Real Estate Tips for Home Buying, Selling & More.

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