Least Affordable Metros for Homeownership

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by on May 12, 2014

The past year has been volatile for the U.S. housing market, and last week the Commerce Department revealed that March’s 14.5% monthly drop in sales of new single-family homes was driven primarily by buyers’ inability to come up with the cash. Homeownership, that bedrock of the American dream, appears increasingly elusive.

Most would-be homebuyers are in difficult spot—not only do they face a sluggish economy and tight lending standards, they’re also seeing rapidly increasing home prices as higher-income shoppers push up prices in many metropolitan areas. Compare this list to our ranking of Most Affordable Metros for Homeownership.

Methodology

NerdWallet looked at more than 100 U.S. metro areas to determine where homeownership is the least feasible for the average consumer. By dividing the home sale price by the median household income in each metro area, we determined the affordability of homeownership.

Put simply, the higher the ratio of median home price to household income, the less affordable the metro area is.

In a market with rising home prices and tight credit, it is increasingly important that consumers are aware of their homeownership options. Learn more about current mortgage rates and mortgage refinancing options in our mortgage guide, as well as whether it’s best to rent or buy.

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Least Affordable Metros for Homeownership

Jump to your metro area by population:

  1. Small Metro Areas (Population less than 300,000)
  2. Medium Metro Areas (Population between 300,000 and 1,000,000)
  3. Large Metro Areas (Population over 1,000,000)

Small Metro Areas (Population less than 300,000)

 

Metro Area Median Household Income Median Home Price Home Price to Income Ratio
1 Boulder, CO $67,403 $414,400 6.1
2 Naples-Marco Island, FL 56,104 312,700 5.6
3 Barnstable Town, MA 60,424 335,100 5.5
4 Burlington-South Burlington, VT 61,603 280,300 4.6
5 Atlantic City, NJ 54,559 218,300 4.0
6 Gainesville, FL 42,311 167,300 4.0
7 Greenville, SC 40,478 159,200 3.9
8 Pittsfield, MA 47,513 183,400 3.9
9 Bismarck, ND 58,858 217,700 3.7
10 Yakima, WA 44,256 160,000 3.6
Median 4.0
Min 3.7
Max 6.1

1. Boulder, Colo.
With a home price-to-income ratio of 6.1, Boulder is the most expensive small metro area. To address this, the City of Boulder has three programs to encourage homeownership: Homeworks, Solution Grant and House to Homeownership (H2O).

In addition, there are several local organizations dedicated to helping finance homeownership for Coloradans. The Colorado Housing and Finance Authority offers fixed-rate financing as well as education and advice on affordable housing. Another option is to ask the Funding Partners for Housing Solutions for advice. They specialize in underserved communities and are a Community Development Financial Institution certified by the U.S. Treasury.

2. Naples-Marco Island, Fla.

For nonprofits and organizations struggling with the high cost of homeownership in the Naples-Marco Island metro area, Collier County offers grant funding for permanent and temporary housing through its Collier County Continuum of Care Grant Program.

3. Barnstable Town, Mass.
Since 2013, Barnstable Town has seen a 9% increase in home prices, with only a 3% growth in household income. To address the increasing cost of living, Cindy Dabkowski, the Affordable Apartment Coordinator of Barnstable’s Growth Management Department has led an effort to make 10% of the total housing stock affordable to low- and moderate-income households through the Accessory Affordable Apartment Program.

Moreover, regional affordable housing opportunities are available through several organizations. The Cape Cod Commission Affordable Housing Program offers services for low-income families. The Community Action Committee of Cape Cod and Islands offers disabled applicants rental vouchers through its Alternative Housing Voucher Program. And Richard Cross, the commissioner of the Barnstable Housing Authority, has helped implement numerous programs for people with special needs, low-income households, the elderly and handicapped citizens.

4.    Burlington-South Burlington, Vt.
Burlington-South Burlington shows up on our list again this year with a home price-to-income ratio of 4.6 (same as last year). To address home affordability concerns, the South Burlington Affordable Housing Committee this month published a report detailing plans to increase housing access to low-income families.

In addition, residents can look to the O’Brien Brothers Agency for several low-income housing options. The Cathedral Square Corporation, a community designed for low-income people with mobile impairments, also offers several affordable housing options. And residents can turn to the Vermont Affordable Housing Coalition for affordable housing alternatives.

Medium Metro Areas (Population between 300,000 and 1,000,000)

 

Metro Area Median Household Income Median Home Price Home Price to Income Ratio
1 Honolulu, HI $72,292 $661,500 9.2
2 Bridgeport-Stamford-Norwalk, CT 82,614 403,000 4.9
3 Charleston-North Charleston, SC 51,546 221,700 4.3
4 Sarasota-Bradenton-Venice, FL 48,450 203,900 4.2
5 Reno-Sparks, NV 54,077 218,400 4.0
6 Portland-South Portland-Biddeford, ME 56,868 228,900 4.0
7 Tallahassee, FL 45,027 171,900 3.8
8 Colorado Springs, CO 57,549 216,800 3.8
9 Shreveport-Bossier City, LA 43,799 162,400 3.7
10 Durham, NC 52,143 192,700 3.7
Median 4.0
Min 3.7
Max 9.2

1.    Honolulu, Hawaii
Honolulu was the least affordable metro area last year, and this year it is again one of the least affordable, with a home price-to-income ratio of 9.2.

But residents shouldn’t despair. The 162-unit Rycroft Terrace, set to open this month, will offer units priced between $123,480 and $274,990—quite a bit below the median home price of $661,500. Rycroft Terrace’s developer, Peter Savio, has promised that applicants making 30% or less of Honolulu’s median income will get priority housing.

The Aging and Disability Resource Center also offers specific housing tips for seniors.

2.    Bridgeport-Stamford-Norwalk, Ct.

Though Bridgeport-Stanford-Norwalk is the second-least affordable medium-sized metro area, residents have access to numerous nonprofit resources, including the Bridgeport Neighborhood Trust, Mutual Housing Association of Southwestern Connecticut, Norwalk Housing Authority and Norwalk Redevelopment Agency.

Stamford residents can also turn to the Metro Green Apartments‘ affordable housing communities and Charter Oak Communities, both of which provide affordable homes for Stamford residents.

In addition, the state of Connecticut launched CTHousingSearch.org in 2007 to help residents find housing anywhere in the state, including affordable housing options. Connecticut residents also have access to the Housing Development Fund, a program with $93 million in management to fund affordable housing projects.

3.    Charleston-North Charleston, S.C.

Though the Charleston-North Charleston metro area is third on our list, residents have many resources to turn to. In fact, according to the Housing Authority of Charleston, almost 10% of residents in the city sleep in housing provided by the agency. Mercy Living also provides affordable housing options for families, seniors and those with special needs.

4.    Sarasota-Bradenton-Venice, Fla.

Sarasota is known for its temperate weather and beautiful beaches, but it is also fourth on our list with a home price-to-income ratio of 4.2. Residents can turn to the Sarasota Office of Housing and Community Development, as well as apply for public housing through the Sarasota Housing Authority, which currently owns 407 units reserved for low-income families.

Large Metro Areas (Population over 1,000,000)

 

Metro Area Median Household Income Median Home Price Home Price to Income Ratio
1 Anaheim-Santa Ana-Irvine, CA $60,583 $651,640 10.8
2 San Francisco-Oakland-Fremont, CA 77,183 679,240 8.8
3 San Jose-Sunnyvale-Santa Clara, CA 89,940 780,000 8.7
4 San Diego-Carlsbad-San Marcos, CA 63,373 464,280 7.3
5 New York-Wayne-White Plains, NY-NJ 65,791 465,700 7.1
6 Los Angeles-Long Beach-Santa Ana, CA 60,583 405,580 6.7
7 New York-Northern New Jersey-Long Island, NY-NJ-PA 65,791 391,800 6.0
8 Boston-Cambridge-Quincy, MA-NH 72,769 375,900 5.2
9 Miami-Fort Lauderdale-Miami Beach, FL 48,582 246,000 5.1
10 Seattle-Tacoma-Bellevue, WA 67,437 336,300 5.0
Median 6.9
Min 5.0
Max 10.8

1.    Anaheim-Santa Ana-Irvine, Calif.
The Anaheim-Santa Ana-Irvine metro area is the most expensive place to own a home in the United States, with a median home price more than 10 times the median household income.

To address the housing affordability challenge, the Orange County Housing Authority has several programs to help qualified families, including the Housing Choice Voucher Program and Project Based Vouchers. Anaheim’s Housing Authority also offers up to $125,000 in down payment assistance for first-time homebuyers. The city of Irvine Redevelopment Agency also has three addresses for subsidized housing, while the City of Santa Ana offers rent assistance through the Housing Choice Voucher program.

2.    San Francisco-Oakland-Fremont, Calif.

With recent protests against the tech industry, San Francisco is becoming notorious for its housing shortages and rising cost of homeownership. However, residents should note that there many available resources that they can turn to for advice, including the San Francisco Housing Authority. Moreover, recent moves by the Board of Supervisors to strengthen the penalties for evictions under the Ellis Act and by the Mayor’s Office of Housing and Community Development to give preference to evicted tenants aim to address the housing crisis.

Local governments also have created dedicated trusts to fund affordable housing construction, including the Berkeley Housing Trust Fund and San Francisco’s Housing Trust Fund.

3.    San Jose-Sunnyvale-Santa Clara, Calif.

In the heart of Silicon Valley, citizens in need of advice can turn to organizations such as the Housing Trust Silicon Valley. Qualified residents (that is, low-income families who spend more than 30% of income on rent) can also turn to the Housing Choice Voucher (Section 8) Program for rental subsidies. Finally, non-governmental organizations like First Housing Community and SCCHousingSearch.org also provide resources for those seeking affordable housing.

4.    San Diego-Carlsbad-San Marcos, Calif.

While the San Diego-Carlsbad-San Marcos metro area is known for its proximity to beautiful beaches, it also comes with high home prices. Thankfully, residents have a few organizations to turn to. In San Diego, residents can ask for advice from the San Diego Housing Commission, which owns more than 2,000 affordable housing units. Carlsbad residents can apply for one of more than 2,000 affordable housing units through the City of Carlsbad Inclusionary Housing Ordinance. In San Marcos, residents can turn to the San Marcos Housing Authority, recognized as a “high performer” in 2013 by the Department of Housing and Urban Development, and to the Affordable Housing Advocates, which is led by attorney Catherine Rodman and supports housing initiatives for low-income families.

Key Trends

  • Least affordable metros tend to be metros with high income disparities
    • In areas of high income disparities, high-earners push up home prices – often to the point where the average resident cannot easily afford homes.
    • This is less true in areas of low income disparity, where to-be homeowners tend to have more similar buying power.
  • Increases in home prices are driving the decrease in home affordability
    • While household income has increased slightly year-on-year, home prices have grown at a faster rate—leading to a drop in affordability.
    • For example, home prices in Bridgeport-Stamford-Norwalk, Ct., and San Francisco-Oakland-Fremont, Calif., have increased by 6% and 14%, respectively, while household income in each area has only increased by just 3%.
  • The most affordable metro areas are more than twice as affordable as the least affordable metro areas
    • This year, the top 30 least affordable metro areas by population have a home price-to-income ratio of 4.7, more than double the ratio of 2.3 for the top 30 most affordable metro areas.
  • Californians have to put up with the least affordable housing
    • Orange, San Francisco, San Diego and Los Angeles counties hold four of the top five spots among the least affordable large metro areas.

Data came from the US Census and the National Association of REALTORS
Townhomes image from Shutterstock

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