Housing remains one of the biggest drags on the national economy, with housing prices continuing to slide in many large metro areas as overloaded inventories clog the market. This makes for dozens of U.S. cities where homes can be bought for low prices—often $150,000 or less.
According to U.S. News analysis of data from the National Association of Realtors and the U.S. Census Bureau, many of the metropolitan areas where homes are the most affordable are also cities that have been hardest-hit by foreclosures, like Las Vegas, Phoenix, and Atlanta. In these cities, home prices are low, and median incomes are substantial enough to make home-buying affordable, even attractive.
[See a slideshow of the 10 cities with the most affordable houses.]
The data shows that the discrepancies between home prices and median incomes varies widely from one city to another. In the most affordable cities, homes prices are less than three or even two times the median household income. On the other end of the spectrum, home prices in the most expensive cities are six to seven times the median incomes. In contrast, the national median single-family existing home price— $171,900, according to the National Associaton of Realtors—is roughly 3.25 times the national median income (per U.S. Census Bureau 2009 figures, adjusted for inflation).
In the most affordable cities in the nation, buyers might pay a very small fraction of their incomes to buy mid-market homes. Take for example an Atlanta median-income homebuyer and a median-income homebuyer in San Jose, where homes are among the most expensive in the nation, with a median price of $610,000. If both take out 30-year fixed-rate mortgages at 4.75 percent interest on 80 percent of the price of their respective cities' median-priced houses, the financial toll on the buyers is starkly different. According to Bankrate.com's online mortgage-rate calculator, for the San Jose buyer, that would mean monthly payments of $2,546, or about 35 percent of that city's median monthly household income. That is not far outside the realm of what many personal finance experts consider "affordable"—traditionally, spending no more than one-third of one's income on housing. However, it is far more than the Atlanta homebuyer, for whom monthly payments would be $426, or less than 10 percent of median income.
[See political cartoons on the economy.]
Of the 51 metropolitan areas with populations over 1 million, these are the 10 most affordable metro areas—those with the smallest ratios of median home prices to median household incomes:
| Rank | Metropolitan Area | Median Price | Median Household Income | Ratio |
|---|---|---|---|---|
| 1 | Atlanta-Sandy Springs-Marietta, Ga. | $102,100 | $58,355 | 1.75 |
| 2 | Minneapolis-St. Paul-Bloomington, Minn.-Wis. | $145,000 | $66,404 | 2.18 |
| 3 | Las Vegas-Paradise, Nev. | $126,200 | $56,294 | 2.24 |
| 4 | Rochester, N.Y. | $118,900 | $52,971 | 2.24 |
| 5 | Phoenix-Mesa-Scottsdale, Ariz. | $126,000 | $55,548 | 2.27 |
| 6 | Cleveland-Elyria-Mentor, Ohio | $108,500 | $47,761 | 2.27 |
| 7 | Cincinnati-Middletown, Ohio-Ky.-Ind. | $127,300 | $54,534 | 2.33 |
| 8 | Buffalo-Niagara Falls, N.Y. | $113,000 | $48,199 | 2.34 |
| 9 | Saint Louis, Mo.-Ill. | $129,000 | $54,386 | 2.37 |
| 10 | Kansas City, Mo.-Kan. | $137,000 | $57,363 | 2.39 |
Sources: National Association of Realtors, 2011 Second-Quarter Median Sales Price of Existing Single-Family Homes (Median Price); U.S. Census Bureau American Community Survey 2009, median household income, adjusted for inflation. Median home price data unavailable for Detroit; Nashville, Tenn.; and Pittsburgh, Pa.
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Xanna Don't of GA 1:16PM August 16, 2011
Tony of TX 1:04AM August 16, 2011
of 12:16AM August 16, 2011