Improved Housing Affordability But Growing Gap Between Local Housing Markets

The affordability of homes in the US increased slightly during the first quarter of 2014. The national average is improving, but there are great differences between the different local markets. While in smaller towns more homes are becoming affordable in the largest metro areas the affordability rate is falling to ever lower levels.

Some 65.5% of homes were affordable to the household earning median income during the first quarter of 2014. This is due primarily to the decrease in the median home price from $205,000 during the final quarter of 2013 to $195,000 during the first quarter of 2014. The median income also decreased from $64,400 to $63,900. The decrease in the median income was significantly smaller and this resulted in the improvement of affordability. The low mortgage rates have a positive impact on affordability as well.

Housing affordability increases primarily in small towns where there is plenty of room for the building of new homes and where the economy is not particularly strong. At the same time, in many of these places the median income is much higher than the national average. Most of these places are in the Northeast and Midwest. For the first quarter of 2014, Syracuse, New York, was the most affordable place for buying a home. Some 93.7% of all homes in the town were affordable to median income earners. Syracuse is followed by Buffalo, New York, Youngstown, Ohio, Harrisburg, Pennsylvania, and Dayton, Ohio.

The city with the least affordable housing during the first quarter of 2014 was San Francisco, California. Only 13.3% of the homes in the city were affordable to local households with median income. Santa Anna, Los Angeles and San Jose in California and New York City are also among the cities with low housing affordability.

The low housing affordability in the large cities is a major barrier preventing young income earners from buying their first home.

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