Opportunities Abound Even in Most Expensive Markets

Real estate website Zillow published a study showing that even in the most expensive housing markets in America, affordable pockets remain.

The site’s research on mortgage burdens at the city level shows how hot spots within popular housing markets have caused runaway housing costs, placing significant burdens on the people who live and work there even as the cities next door remain more affordable.

However, choosing a more affordable city likely requires trade-offs, such as fewer amenities or longer commutes.

One of the clearest displays of these disparities is the San Jose metro area. Homebuyers in Palo Alto can expect to spend 75 percent of their income on a house payment. However, 15 miles away in Milpitas, California, the average percentage of income spent on a house payment is only 35 percent.

“The Bay Area and other expensive West Coast markets get a lot of attention for being unaffordable, but even they have some areas where the share of income spent on housing is relatively low," said Zillow Chief Economist Dr. Svenja Gudell. "Of course, buyers have to be willing to make some trade-offs to live in more affordable cities within the metro. Some cities in the most in-demand housing markets across the country have such a high housing burden that they are simply not feasible for buyers with lower incomes. If income growth doesn't keep pace with home value growth, especially as mortgage rates rise, inequality will persist."

In San Francisco, the flourishing tech industry created a housing market with a high housing burden – buyers in San Francisco need to spend nearly 54 percent of their income on mortgage payments. Across the bay, homebuyers in Oakland fare a little better. Mortgage payments there require 42 percent of the typical household income.

Home buyers on the East Coast face similar challenges. Those looking to purchase a home in the New York/northern New Jersey metro region can expect to spend an average 24.9 percent of their income on a mortgage payment. A home buyer could look at homes in Brentwood, New York and pay only 14.7 percent of their income on a mortgage.

To see a full list of expensive metros and their cheaper suburbs, click here.