As more millennials look at entering the housing market, Arch MI's latest quarterly Housing and Mortgage Market Review (HaMMR) has listed the 25 most affordable cities with a strong labor and housing market for young Americans to buy their homes.
According to the report, all these 25 cities have better overall affordability compared with the national average, which currently requires 31 percent of the median household's income to cover mortgage payments on a median-priced home.
“It’s important for potential buyers to understand that many markets remain reasonably affordable by historic norms, but this may not last much longer since the consensus forecast is for prices and interest rates to continue increasing,” said Dr. Ralph G. DeFranco, Global Chief Economist for Arch Capital Services Inc. “The good news is there are many cities with vibrant job markets and homes that are more affordable than the nation as a whole.”
According to the HaMMR report, the Fortworth-Arlington metro area in Texas tops this list with a required median income of 27 percent to cover mortgage payments and a 9.8 percent year over year growth in home prices. At second place, the report listed Jacksonville, Florida, where the average homeowner spent 28 percent of household income on mortgage payments and saw a 9.7 percent growth in home prices.
Oklahoma City, Oklahoma which required 19 percent of a family's household income for mortgage payments and had seen a 4.6 percent growth in home prices came third on this list followed by the Charlotte-Concord-Gastonia metro area in North Carolina with a median DTI of 27 percent and a home price growth of 9.3 percent. The Grand Rapids-Wyoming area in Michigan rounded off the top five of the top 25 affordable cities for millennials with a median DTI of 24 percent and an 8.6 percent growth in home prices.
The quarterly Arch MI Risk Index, which was also released with the HaMMR, is a statistical model based on nine indicators of the health of local housing markets. According to this index, the probability of home prices being lower in two years is unusually low at 6 percent, up 1 percent from the previous quarter due to worsening affordability, particularly in Western states. Every state is expected to have positive home price growth over the next two years, continuing recent trends. Alaska tops the list of states with the highest risk of having low home prices in two years, followed by West Virginia.