The housing bust rearranged residential real estate values downward by percentages not seen since who knows when. On average prices plummeted 30% from the highs reached in 2006. One of the effects of that major shift would logically be that now homes were going to be more affordable, especially in the severely abused cities. Many would-be homeowners are salivating at the concept of being able to qualify for today’s inexpensive mortgages and then push over low-ball purchase offers to grab a home from foreclosure, short sale or even from a regular seller willing to compromise on price.
The reality appears to be quite different from that according to a recent real estate research paper.
Interest.com put together what it calls a Home Affordability Study to understand where things actually stood on this issue, covering 25 large metropolitan areas. It collected relevant info on median incomes and median home prices, mortgage interest rates, consumer debt, homeowners insurance premiums and property taxes. National Association of Realtors, or NAR, U.S. Census Bureau, Experian and National Association of Insurance Commissioners were key contributors to the report. Tossing this accumulated data around would eventually evolve into a legible account that would show whether a family earning a median household income could afford a median-valued property in a given city.
According to the Home Affordability Study, Detroit, Atlanta and Minneapolis-St. Paul offer the most affordable housing, which really is more or less expected. The least affordable on the other hand are San Francisco, New York and San Diego, again many would go along with that.
The situation, however, is more complicated than that. Miami real estate prices took some profound assaults during the crisis and it should be one of the more affordable ones but it isn’t. The median household income there is only $45,407, the second lowest among the 25 metro areas studied, that mainly keeps it far from being affordable.
Washington, D.C.’s property values are truly admirable that should easily bump it up to the league with the San Frans, yet that didn’t happen. The average median income of $86,680 there is the highest in the exercise is largely why, and ranks it as being plain affordable, not super so like for instance Atlanta.
Overall, out of the 25 cities only 14 were affordable to a median income household. It is far less than anyone would’ve anticipated, knowing how much grief the housing crash has caused to property values. This is now. Real estate prices are inching up in several regions with demand improving and as they keep edging higher, the affordability factor will only worsen. If the economy moves along nicely and steadily, creating badly needed jobs and higher incomes, households should be able to keep up with the trend. Otherwise, homeownership could be a distant dream for many.