Wednesday, August 20, 2008

America's Most and Least Affordable Cities

CNNMoney cites a new National Association of Home Builders quarterly report:
Indianapolis led the the nation's major metro areas in home affordability for the 12th straight quarter. The median price of homes sold during the second quarter was $108,000, down from $122,000 last year. And 91.6% of the households there earning the median income of $65,100 could afford to buy a median priced home. That's up from 86.8% last year.

New York was the least affordable major housing market in the country, according to the report. It was the first time that a major metropolitan area outside of California was the least affordable home market in the 17-year history of the report. Los Angeles was the least affordable housing market at this point last year.

"Prices went down a lot in both areas, but they fell a lot more in Los Angeles," said Ahluwalia. "Prices are declining very rapidly in California because of a large supply and low demand."

In New York, the median home price fell slightly year over year to $481,000 from $510,00. That led to an increase in affordability; 11.4% of households earning the median income of $63,000 could afford to buy a median priced home, up from 6.3% in the second quarter of 2007.
Given the NAHB report above, this little tidbit from Wikipedia seems nuts:
However, in 2008, Indiana ranked 12th nationally in total home foreclosures and Indianapolis led the state within this.


  1. This comment has been removed by the author.

  2. James - I'm not sure what point you are trying to make. Does that foreclosure rate seem high for such an affordable area?

    If so, the other factor that could be at play was flipping. We know flippers invaded low cost areas moreso than high cost areas. Perhaps there was a lot of flipping in Indianapolis, and now that the market has gone sour, they have sent in their "jingle mail".

    Just a thought.

  3. I've had it explained to me that in areas with rapid appreciation, people do all they can to hold on to their homes. On the other hand, in places with less appreciation, there's less incentive to try to hang on to the house for the "bundle of money" they expect to make. Cheaper homes = psychologically easier to walk away from.

  4. I live in Indy and have an opinion on the question about how come a city with the most affordable housing also has a high foreclosure rate.

    It is not uncommon for houses in decent suburban areas to appreciate 2% a year. Two percent over 20 years, like one house I had built back in the 80's, doesn't lead to high prices.

    Prices here are low for multiple reasons:

    a) no shortage of flat land to build on !
    b) few zoning/planning barriers to construction
    c) fairly low construction wages (vs a Seattle or a NYC)
    d) economy has been bleeding good middle class manufacturing jobs since the 70's - less money floating around to bid up prices.

    The foreclosure rate is high because:

    a) This is a Realtor town - MLS is a closed system, it's very difficult to get sold prices to make comparisons
    b) Crooks run wild - real estate agents, appraisers, flippers, there is no enforcement of any kind
    c) No shortage of poor uneducated people to take advantage of