Are You Operating in One of the Ten Least Affordable Real Estate Markets

Real Estate Agent with Exit Realty United

LA Museum of ArtMatt Woolsey of 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

1.   Los Angeles, CaGolden Gate Bridge
2.   San Francisco, Ca
3.   San Diego, Ca
4.   New York
5.   Miami, Fla.;
6.   Sacramento, Ca
7.   Las Vegas, NV
8.   Seattle, Wa
9.   Boston, Ma
10. Orlando, Fla.

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.

Comments (4)

Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904


You betcha!  Serving all of central Florida (Orange and Osceola Counties) we have seen astronomical increases in Home Prices.  In some cases up 300% from a couple of years ago.  Conversely the average wage earner has not been paid accordingly. Jobs that pay 60K a year up north pay only half that here.

Compounded with the cost of is no longer cheap to live in this part of Florida. But we do have the sun year round!

Aug 16, 2007 02:01 AM
Heather the Realtor Orlando, Lake Mary
LemonTree Realty - Orlando, FL
First Time Home Buyers, Bank Owned Homes
I somewhat agree with Allison Im in Orlando as well, however even though pay maybe more in northern states they also have to pay a high income tax which brings their actual pay down.
Aug 16, 2007 02:09 AM
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer
This was a great, well thought out piece Sharon!  Tip compliance, no income tax and low property tax doesn't seem to be a factor here and that concerns me with all these "lists". 
Aug 16, 2007 05:30 AM
Sharon "Toni" Brown
Exit Realty United - South Ozone Park, NY
South Ozone Park - New York City Real Estate
You know guys I do agree.  The one thing I was skeptical about was that they used the gross income / home price ratio and we all know that it's not how much you make but how much you keep.
Aug 16, 2007 06:42 AM