Matt Woolsey of Forbes.com wrote an article on the Ten Least Affordable Real Estate Markets.
The criteria for determining the list was by figuring how many years of gross income it would take to buy a home at the median sales price using the NAHB/Wells-Fargo index with the rating of home price to earnings. Affordability was determined by the lower number.
Although ten years ago San Francisco was the only city ranked above 4.5 they are now ranking 13 cities above that benchmark.
With the high inventory of homes on the market and the tightening of the lending industry, they determined that there are more homes and less qualified buyers.
"The credit barrier affects all strata, but it's more critical at the lower end," says Jonathan Miller, president of Miller Samuel, a New York-based real estate appraisal and consultancy firm. He points out that recent bank struggles with subprime lending have resulted in tighter lending standards. "And the success of the market's lower strata is critical to recovery of the whole market."
The most interesting thing is that affordability seems to not be determined by the actual price of homes, but by the number of median-income earners buying homes.
According to the article; Since 2000, Boston area home prices have risen 16.7%. Median-income buyers who make up 50% of the buying pool in 2000 now represent only 28% of it. By contrast, in Raleigh, N.C., home prices have grown by 37% in that time period, and the share of median-income earners buying homes has dropped by only 3%.
Migration has become a factor as many people leave the areas where the market has risen above their means. It is said that seven of the ten least affordable cities are experiencing negative domestic migration (more people are moving out than moving in) so the drop in affordability is not due to an increase in demand.
OK here's the list
Top Ten Least Affordable Real Estate Markets
There is one thing they haven't factored in their article; US! As professionals we can do our part in changing the direction in the market with the way we do business.
Matching the owner with the right home SHOULD include affordability. Lord knows I want a Town House in Midtown Manhattan but at this time I can't AFFORD one. If one was to drop out of the sky at an amazing price, the next question for me is will I be able to maintain it. If the price of your mortgage is the only determining factor when deciding on a home, you've got problems. We see that in the increasing number of foreclosures and bank-owned properties on the market. We Sell HOMES, not DREAMS.
Buyer, oh buyer! That may be reading this. Don't be discouraged by all the News articles. Get with the right Real Estate Professionals that will guide you through this process. It's your market right now, with lots of homes to chose from. Do your due diligence, look at your income with an objective eye and you'll be in the home that is right for you.