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Where the Average Household Can Afford the Most and Least Home – 2019 Edition

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afford the most home

In 2018, the median household income in the U.S. was $61,937 while the median home value was $229,700. But because median household incomes and home values differ greatly by place, home affordability can vary drastically. With this in mind, SmartAsset decided to take a closer look at home affordability in the U.S.

To find where the average household can afford the most and least house, we examined data for the 50 largest cities in the U.S. Specifically, we used our home buying calculator to input data on the median household income in each city and average non-mortgage debt by state to estimate how much home the average household could afford. We then ranked cities based on where local households could afford the most and least home relative to the median home value. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.

Key Findings
  • There’s good news. In 27 of the 50 cities we analyzed, households can still afford the median-valued home while paying off the average non-mortgage debt in their state. We found that residents in the Midwest and the South are best positioned to afford a home, but two Northeast cities, Philadelphia and Baltimore, also rank well for home affordability.
  • The Coasts do poorly. The five cities where residents can afford the least home are all on either the East or West Coast in New York, California and Florida.
Cities Where Residents Can Afford the Most Home 1. Detroit, MI

Detroit, Michigan ranks first in our study on the cities where the average household can afford the most home. The 2018 median household income in Detroit was $31,283. Assuming the average household has a monthly debt payment of about $250 and saves 10% of its gross income for five years for a down payment, we found that the average household could afford a home worth $97,100, about 88% more than the local median home value. This is the highest percentage of any city in our study.

2. Oklahoma City, OK

According to data from Experian, the average household in the state of Oklahoma has about $25,000 in non-mortgage debt. Assuming that debt would be paid off within 10 years at 6% interest and the average household would save 10% of its income for five years for a down payment, the average resident in Oklahoma City, Oklahoma could afford a home worth $230,000. This is $68,300 (about 42%) more than the median home value in the city, $161,700.

3. Indianapolis, IN

The ratio between the home value we estimate the average household in Indianapolis, Indiana could afford and the value of the median home there is 140.9%. Specifically, we estimate that the average household there could afford a $201,000 home, while the 2018 median home value was $142,700.

4. Omaha, NE

Median home values in Omaha, Nebraska are the highest of any city in our top five. According to Census estimates, in 2018 the median home was valued at $163,400. The median household income in Omaha is also high relative to other cities in our top five places where residents can afford the most home. At $59,266, household income here falls just below the national average of $61,937.

5. Tulsa, OK

The 2018 median home value in Tulsa, Oklahoma was $144,100, but we estimate that the average household could afford a home worth $197,000. In percentage terms, this means the average household in Tulsa could afford a home worth almost 37% more than the median home value.

Cities Where Residents Can Afford the Least Home 1. New York, NY

New York, New York is the first city in our list of the cities in the country where residents can afford the least home. The median household in New York City earns about $64,000 per year, and residents in the state of New York have about $24,000 in non-housing debt on average. While average debt for the state of New York does not rank particularly high relative to that of other states, median home values in the city are high compared to incomes. The 2018 median home value was $645,100 and we estimate that the average household could afford a home worth $247,000. As a ratio, the average household could afford only 0.38 of the median home in New York.

2. Los Angeles, CA

Los Angeles, California has a ratio of 40.4% between the home value we estimate the average household could afford and the value of the median home in the city. Specifically, inputting a median household income of $62,474 and an average monthly debt payment of $271 into our home buying calculator, we find that the average household can afford a home worth $276,000, a far cry from the 2018 median home value of $682,400 in LA.

3. San Francisco, CA

Though the median household income in San Francisco, California is relatively high at $112,376, homes are still unaffordable for most residents. The 2018 median home value was $1,195,700, the highest of any city in our study by more than $200,000 and about $680,000 more than what we estimate the average household in San Francisco could afford.

Unfortunately, rent is also high in San Francisco. In our study on income needed to pay rent in the largest U.S. cities, San Francisco ranks the highest with an estimated income needed of almost $197,000, well above the median household income there.

4. Long Beach, CA

The cost of living in California is high, making buying a home more difficult or potentially impossible for many residents. Long Beach is the third California city in our top five cities where the average household can afford the least home. In 2018, the median household income in Long Beach was $61,610. Assuming monthly debt payments of $271 for residents and saving 10% of income for five years, we found that the average household could afford a house worth $280,000. However, the 2018 median home value, $600,700, was more than double that estimation in Long Beach.

5. Miami, FL

The median home value in Miami, Florida is the lowest of any of the top five cities where residents can afford the least home. The Census estimated that in 2018 the median home value was $350,400, but the median household incomes in Miami are well below the national average. In 2018, the median household had an income of $41,818. As a result, our estimation of the amount of home you could afford in Miami is $164,000. As a result, the ratio between the home an average household could afford and the homes in the city is 46.8%.

Data and Methodology

In order to rank the cities where the average household could afford the most and least home, we looked at data for the 50 largest cities across four metrics:

  • Median household income. Data comes from the Census Bureau’s 2018 1-year American Community Survey.
  • State average non-mortgage debt. Data comes from Experian and is for 2018. To estimate monthly debt payments, we assumed debt would be paid off within 10 years at 6% interest.
  • Median home value. Data comes from the Census Bureau’s 2018 1-year American Community Survey.
  • Down payment. We assumed the average household would save 10% of its income for five years.

To create our rankings, we first estimated how much home the average resident could afford. To do this, we ran the above figures through SmartAsset’s how much home can I afford calculator. We then compared how much home the average household could afford to the local median home value. The city with the highest affordability ratio ranked first on our list of where the average household could afford the most home and the city with the lowest affordability ratio ranked first on our list of where the average household could afford the least home.

Tips for Managing Your Savings
  • Make smart investments with a little help. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • Buy or rent?  When you’re moving to a new city, you need to decide if you are going to rent or buy.  If you are coming to a city and plan to stay for the long haul, buying may be the better option for you. On the other hand, if your stop in a new city will be a short one, you’ll likely want to rent.

Questions about our study? Contact us at press@smartasset.com

Photo credit: iStock.com/ucpage

The post Where the Average Household Can Afford the Most and Least Home 2019 Edition appeared first on SmartAsset Blog.

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