With prices continuing to head in a northerly direction—and showing no signs of reversing direction—it’s getting harder and harder for many Americans to purchase a house. And that’s especially disheartening for renters ready to become homeowners. But there’s no reason to ditch their dream, according to a study by First American.
Across the nation, renter housing affordability (i.e., how much a person can buy based on median household income), remains elevated, the study indicated. To provide a deeper look at the details behind the data, it analyzed the top 50 U.S. cities against the median renter’s house-buying power. Of note, house-buying power is based on the prevailing 30-year, fixed-rate mortgage and assumes a 5 percent down payment and also that one-third of pre-tax income is used for the mortgage. First American then used the renter’s power quotient to determine what share of the for-sale homes they could afford to buy.
According to the analysis, in 2017 the most affordable city among the 50 largest cities for median renters desiring to buy a home was Detroit. The least affordable? San Francisco. “The median renter, with an income of $43,643 and house-buying power of $265,000, could afford 87 percent of the homes sold in the Motor City,” the study reported. “Move that same renter with the same income and house-buying power to San Francisco, and the renter could afford less than 1 percent of homes sold.”
Racking up one of the country’s highest home vacancy rates, Detroit can ascribe it’s high housing affordability to lower demand and surplus supply, the company notes. As for the Bay Area’s lack of affordability, that can be attributed in part to the area’s strong tech-driven labor market, where legions of well-compensated workers are competing for limited housing supply, First American says.
Besides top-of-the-list Detroit, what are the other affordable options comprising First American’s top 10 most affordable cities? Cleveland occupies the No. 2 slot, followed by Oklahoma City; Kansas City, Missouri; Tampa Bay, Florida; Las Vegas; Philadelphia; Virginia Beach, Virginia; Columbus, Ohio; and Memphis, Tennessee.