Vancouver, Manhattan, and San Francisco top the list of North America’s least affordable housing markets, according to a new study by Point2 Homes.
Point2 Homes’ examined the 50 largest markets in North America and created an “affordability ratio” by dividing median home sale price by the yearly median income for that area. Put simply, Point2 Homes affordability ratio estimates how long it would take to pay off a median home in each of the markets, if a homebuyer were somehow able to put their entire annual income toward paying off that total.
In both Manhattan and San Francisco—the second and third most unaffordable markets in North America, respectively, according to the report—the median home selling prices are both in the neighborhood of $1.2 million. However, the median family income for each city is different. In Manhattan, it’s ($77,559), meaning it would take approximately 15.6 years to pay off a median home. In San Francisco, the median income is significantly higher at $92,094, meaning a median home could be paid off in 13.8 years. Given that pretty much no one is capable of funneling their entire annual income solely toward housing, this should give you an idea of just how unaffordable these cities actually are.
Brooklyn, New York, Los Angeles, Boston, San Jose, Seattle, and San Diego round out the rest of the top 10 most unaffordable North American cities.
There are many contributors to affordability, not the least of which is availability. In the decade following the economic crisis of 2007-08, the number of potential home buyers grew but inventories shrank, adversely affecting first-time buyers. As demand exceeded supply, the advantage belonged to sellers.
In Manhattan, first-time buyers have been affected by persistently low inventory, and prices have also been driven up more than 30 percent by rising development costs and a trend toward more luxury buildings. The situation in San Francisco is a little different. The median income there is the nation’s highest, so the market may not be as susceptible if the mortgage deduction is cut, but there remains concern about the impact of the federal tax reduction plan, and inventories there also have remained low.
On the other end of the spectrum, Detroit takes the distinction of being the most affordable market in North America. The median home price in the Motor City is $48,000. Unfortunately, the median family income is only $25,980. With those numbers, a family putting all their income toward paying off a median home in Detroit could do so in less than two years.
You can explore the rest of Point2 Homes’ data, and find out where your city ranks in home affordability, by clicking here.