Your ability to own a home is affected by where you live. Even people with modest incomes can afford homes in Decatur, Illinois, the metropolitan area with the nation’s most affordable houses. At the other end of the affordability spectrum is the San Jose, California, metro area, where high incomes are outmatched by stratospheric home prices.
A home is most affordable when it doesn’t cost much more than a year’s pay. Decatur is an affordable market because the median house costs about one and a half times the median annual income. (“Median” is the midpoint, where half of the values or incomes are lower and half are higher.) In comparison, there’s San Jose, where a typical household earns a six-figure income but a median single-family house costs about 12 times what a typical household earns.
Every quarter, NerdWallet calculates home affordability for 172 metropolitan areas by comparing the median annual household income and the monthly principal-and-interest payment for a median-priced single-family home. After accounting for a 20% down payment, the house payments were calculated at an interest rate of 4.45%, the average rate for a 30-year fixed-rate mortgage in the first quarter; payments don’t include insurance, property taxes or homeowner association dues.
The comparisons revealed the five most- and least-affordable markets for buying a home in the first quarter of 2018. The rankings were compiled using data from the National Association of Realtors, the Census Bureau and NerdWallet surveys.
» MORE: How much can you afford in your area?
Most-affordable metro areas
1. Decatur, Illinois
Median home price: $73,000
Median household income: $46,198
Principal and interest payment: $294 (equals 7.6% of median monthly income)
The affordability of homes in Decatur is bolstered by the fact that homes don’t sell quickly. In March, single-family homes for sale in Decatur had been on the market for a median of 119.5 days, according to Realtor.com. The national median for all home sales was 63 days. A longer time on market in Decatur means buyers aren’t competing as much for homes, and they may have an edge in negotiations with sellers. This makes it easier to take advantage of the affordability. In March, prices in Decatur were reduced on 110 listings and increased on two listings. The median home price fell 15.2% from the first quarter of 2017 to the first quarter of 2018.
2. Cumberland, Maryland-West Virginia
Median home price: $86,200
Median household income: $45,808
Principal and interest payment: $347 (9.1% of monthly income)
Listed homes in Cumberland had been on the market a median of 136.75 days in March — more than twice as long as the national median. Despite the slow sales pace, home prices rose 5.4% from the first quarter of 2017 to the first quarter of 2018. In March, price decreases outnumbered price increases 72 to 2, which is good for buyers.
3. Elmira, New York
Median home price: $100,800
Median household income: $51,269
Principal and interest payment: $406 (9.5% of monthly income)
Homes in Elmira had been on the market for a median of 97.5 days in March, according to Realtor.com, just over a month longer than the national median. The median home price rose 12% year over year in the first quarter. In March, 76 home listings had price cuts and no listings had a price increase.
4. Binghamton, New York
Median home price: $103,000
Median household income: $51,360
Principal and interest payment: $415 (9.7% of monthly income)
Homes for sale in Binghamton had been listed a median of 108.5 days in March, a month when price decreases of listings outnumbered price increases 134 to 2. Yet prices increased 12.9% year over year, the fastest price appreciation among the five most-affordable metros.
5. Peoria, Illinois
Median home price: $114,800
Median household income: $57,090
Principal and interest payment: $463 (9.7% of monthly income)
Peoria had the highest house prices among the five most-affordable metro areas. Prices were balanced out by median household income, which also was the highest among the five most affordable. It was the quickest-selling market among the five most affordable, with homes listed a median of 77.25 days in March. Prices rose the least of the most-affordable at 2% year over year. Price decreases on listings outnumbered price increases in March, 600 to 10.
Least-affordable metro areas
1. San Jose-Sunnyvale-Santa Clara, California
Median home price: $1.37 million
Median household income: $110,040
Principal and interest payment: $5,533 (60.3% of median monthly income)
Buyers have to act fast in the San Jose area, the center of Silicon Valley: For-sale homes spent a median 17 days on the market in March, according to Realtor.com. Price cuts on listings outnumbered price increases in March, 116 to 30. The median home price rose a whopping 28.3% from the first quarter of 2017 to the first quarter of 2018. It was the metro area with the greatest home-price appreciation in the nation.
2. Honolulu, Hawaii
Median home price: $775,500
Median household income: $80,513
Principal and interest payment: $3,125 (46.6% of monthly income)
Honolulu, a popular market for international buyers, spent a median 52 days on the market in March, according to Realtor.com. The median home price went up 4% year over year. Price cuts outnumbered price increases in listings 474 to 20 in March.
3. San Francisco-Oakland-Hayward, California
Median home price: $917,000
Median household income: $96,677
Principal and interest payment: $3,695 (45.9% of monthly income)
Just to the north of Silicon Valley, homes here sell almost as fast. In the San Francisco, Oakland and Hayward area, homes spent a median of just 22 days on the market in March, according to Realtor.com. The median home price went up 12.5% from the first quarter of 2017 to the first quarter of 2018. Price decreases on home listings outnumbered price increases in March, 474 to 114.
4. San Diego-Carlsbad, California
Median home price: $610,000
Median household income: $70,824
Principal and interest payment: $2,458 (41.6% of monthly income)
Do you see a pattern here? California has four of the five least-affordable metro areas. San Diego homes were listed a median 32.5 days in March, according to Realtor.com. The median home price rose 8.2% in the 12 months ending in March. Among homes listed for sale in March, price cuts outnumbered price increases 1,616 to 152.
5. Los Angeles-Long Beach, California
Median home price: $545,500
Median household income: $65,950
Principal and interest payment: $2,198 (40% of monthly income)
Although homes in Southern California aren’t selling as quickly as in Northern California, they’re still going quickly. For-sale homes in the Los Angeles area had been on the market a median of 33.5 days in March, according to Realtor.com. The median home price rose 12.3% from the first quarter of 2017 to the first quarter of 2018, and price cuts outnumbered price increases in March, 3,694 to 528.
These rankings were compiled using data from:
- The National Association of Realtors’ median metro home prices for the first quarter of 2018.
- The Census Bureau’s median household income from the 2016 American Community Survey 1-year series (the latest available data).
- NerdWallet’s daily mortgage rate survey.
- Realtor.com’s market trends data from March.
A version of this story was originally published by The Associated Press.
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The article Home Affordability Watch, Q1: California Buyers, Keep Dreamin’ originally appeared on NerdWallet.
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