{"id":144547,"date":"2022-09-07T13:03:49","date_gmt":"2022-09-07T19:03:49","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=144547"},"modified":"2023-08-08T14:59:46","modified_gmt":"2023-08-08T20:59:46","slug":"most-affordable-housing-markets-in-the-world","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/most-affordable-housing-markets-in-the-world","title":{"rendered":"Here are 92 of the Most Affordable Housing Markets in the World\u2014Turns Out the U.S. Has Most of Them"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC5968539563&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">Housing affordability in the United States has steadily declined throughout 2022 as prices and interest rates continue to rise. Affordability plays an enormous role in the housing market&#8217;s direction, and recent declines are the leading factor in the housing correction we\u2019re currently experiencing. To understand where the market is going, we need to look closely at this issue.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Has affordability ever been as low as it is today? Is this level of affordability sustainable, or could it get worse? What markets are still affordable?&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">These are all critical questions that can help inform your investing strategy. In this article, I&#8217;ll help you make sense of today\u2019s housing market by exploring the history of housing affordability in the U.S., how the U.S. compares to other countries in terms of housing affordability, and help you identify some of the most and least affordable markets in the nation.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Please note that affordability is a huge topic\u2014too big for any one article. In future articles, I will look to address additional aspects of affordability like the causes, potential solutions, and rent affordability.<\/span><\/p>\n\n\n\n<p><em>If you&#8217;re looking to analyze your own market for affordability, then a good place to start would be my book, <a href=\"https:\/\/store.biggerpockets.com\/products\/real-estate-by-the-numbers\" target=\"_blank\" rel=\"noreferrer noopener\">Real Estate By The Numbers<\/a>!<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Housing Affordability in the United States<\/span><\/h2>\n\n\n\n<p>Housing &#8216;affordability&#8217; refers to how relatively easy it is for an American with an average income to afford an average-priced home. Right now, affordability is relatively low. <span data-preserver-spaces=\"true\">According to the data provider,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.blackknightinc.com\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Black Knight<\/span><\/a><span data-preserver-spaces=\"true\">, affordability is at its lowest since the early 1980s. This follows an extended period of relatively affordable housing that lasted from the end of the Great Recession until the beginning of 2022.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"512\" height=\"337\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/affordability.png\" alt=\"housing affordability index\" class=\"wp-image-144549\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/affordability.png 512w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/affordability-300x197.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/affordability-340x225.png 340w\" sizes=\"auto, (max-width: 512px) 100vw, 512px\" \/><figcaption class=\"wp-element-caption\"><em>Housing Affordability (1975-2022) &#8211; <a href=\"https:\/\/www.blackknightinc.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">Black Knight<\/a><\/em><\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">To understand why affordability has changed course so quickly, we need to examine the primary components of affordability: housing prices, household income, and interest rates.&nbsp;<\/span><\/p>\n\n\n\n<p><strong><span data-preserver-spaces=\"true\">Housing Prices:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">When houses get more expensive, it puts downward pressure on affordability. And we all know housing prices have grown tremendously over the last two years,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/data-center\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">going up 38% nationally from July 2019 to July 2022.&nbsp;<\/span><\/a> Only now are prices starting to fall, but it&#8217;s uneven across markets.<\/p>\n\n\n\n<p><strong><span data-preserver-spaces=\"true\">Household Income:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">The income of a prospective homebuyer is, of course, an important factor.&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/seekingalpha.com\/article\/4528474-median-household-income-in-june-2022\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Wages have risen 16%<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;since the beginning of 2020, which is very quick in historical contexts but not nearly enough to keep pace with housing prices (or inflation).&nbsp;<\/span><\/p>\n\n\n\n<p><strong><span data-preserver-spaces=\"true\">Interest Rates:&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">Most Americans use some sort of debt to finance a home purchase. As interest rates rise, debt becomes more expensive, and the costs of a home purchase go up. For example, buying a $400,000 house at 4% interest would cost the buyer about $1,910\/month. At 6% interest, the same house would cost just under $2,400\/month.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">With this context, it should be easy to see why affordability has trended in the way it has. At the beginning of the pandemic, interest rates plummeted, creating one of the most affordable housing markets we\u2019ve seen in the U.S. for as long as I have data for.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Housing prices started going up rapidly in the second quarter of 2021, but ultra-low interest rates kept things relatively affordable for the following 18 months. Then, in January 2022, mortgage interest rates started rising from an average of 3.1% for a 30-year fixed-rate mortgage to over 7% by early October 2022.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Needless to say, affordability has tanked. Wages have gone up during this period, but not nearly enough to offset the rapid growth of home prices and interest rates since the beginning of 2022.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">We\u2019ve found ourselves in a period of low affordability, but it\u2019s important to note that this level of affordability is not unprecedented. If you revisit the chart earlier, you\u2019ll see that housing was less affordable in the 1970s and 1980s due to super high-interest rates. If you\u2019re curious, housing prices did continue to rise on a nominal (not inflation-adjusted) basis through the period of low affordability back then, but there were some periods of high inflation during that time. The last time housing was as close to this level of affordability was preceding the Great Recession, and we all know what happened then.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">So, if you\u2019re wondering if this level of affordability is sustainable, the short answer is yes. In the early 1980s, housing was considerably less affordable than today and remained that way for about five years. Of course, historical data doesn\u2019t tell us what will happen next, but it does show us that it\u2019s feasible for housing to remain at low affordability for a long time.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Housing Affordability Across the Globe<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Another way we can try to understand whether current affordability levels are sustainable is by looking at international comparisons. To do this, I examined data from the <\/span><a href=\"http:\/\/www.demographia.com\/dhi.pdf\" target=\"_blank\" rel=\"noreferrer noopener\"><span data-preserver-spaces=\"true\">2022&nbsp;Demographia <\/span>International Housing Affordability<\/a> <span data-preserver-spaces=\"true\">study.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">This report looks at housing affordability across 92 metropolitan areas in Australia, China, Canada, Ireland, New Zealand, Singapore, the U.S., and the U.K. The study ranks each market as either affordable, moderately unaffordable, seriously unaffordable, or severely unaffordable, as measured by a metric known as the \u201cmedian multiplier.\u201d&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The data shows that the U.S. actually has the lowest median average by nation. Note that many of these countries have only one market, and therefore the median is not a good representation of the country as a whole. Also, note that this data is from 2021\u2014before interest rates rose in the U.S.\u2014but still tells an important story.<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"512\" height=\"187\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/US-market-afford.png\" alt=\"international affordability\" class=\"wp-image-144553\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/US-market-afford.png 512w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/US-market-afford-300x110.png 300w\" sizes=\"auto, (max-width: 512px) 100vw, 512px\" \/><figcaption class=\"wp-element-caption\"><em>Housing Affordability Rating by Nation &#8211; Demographia International Housing Affordability<\/em><\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">Out of all markets, Pittsburgh, Pennsylvania, is the most affordable. Hong Kong was the least. If you look at the data closely, you can see the wide variance in U.S. markets. Pittsburgh\u2019s median multiplier is just 2.7, while San Jose&#8217;s is 12.6, a massive difference!&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Even though nearly half of the markets in the U.S. measured fell into the \u201cSeverely Unaffordable\u201d category, the U.S. also had the only market in the \u201cAffordable\u201d category and had a wider distribution of markets. In short, housing is pretty unaffordable in all of these markets, but relatively speaking, the U.S. has more affordable options than other countries. You can see the full list of markets below.&nbsp;<\/span><\/p>\n\n\n<p><iframe title=\"Most Affordable Housing Markets Internationally\" aria-label=\"Table\" id=\"datawrapper-chart-GYpRE\" src=\"https:\/\/datawrapper.dwcdn.net\/GYpRE\/2\/\" scrolling=\"no\" style=\"width: 0; min-width: 100% !important; border: none;\" height=\"1020\" frameborder=\"0\"><\/iframe><script type=\"text\/javascript\">!function(){\"use strict\";window.addEventListener(\"message\",(function(e){if(void 0!==e.data[\"datawrapper-height\"]){var t=document.querySelectorAll(\"iframe\");for(var a in e.data[\"datawrapper-height\"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data[\"datawrapper-height\"][a]+\"px\"}}}))}();\n<\/script><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">To return to the question of the unaffordability of housing in the US, Canada is a good means of comparison. Canada\u2019s housing market has been on fire for decades and took a much smaller hit than the U.S. did in the late 2000s.&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"512\" height=\"384\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/canada-afford.png\" alt=\"canadian housing affordability\" class=\"wp-image-144550\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/canada-afford.png 512w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/09\/canada-afford-300x225.png 300w\" sizes=\"auto, (max-width: 512px) 100vw, 512px\" \/><figcaption class=\"wp-element-caption\"><em>Housing Affordability in Canada (1975-2022)<\/em><\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">Canadian housing prices have accelerated to all-time low affordability levels (as measured by a different methodology than the data above) without falling. Of course, this could (and probably will) change soon, but you can see that housing got less affordable for over 20 years. Despite some periodic declines in pricing, the trend here is clear. Housing has been getting progressively less affordable in Canada for decades and is unlikely to return to the affordable levels seen around 2000 anytime soon.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Could the U.S. be on this path as well?&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">What This All Means&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">In the broadest sense, the U.S. is not in unprecedented territory, even given recent declines in affordability. Housing is at the lowest level of affordability in decades, but it\u2019s been lower in the past, and it\u2019s right in the middle of the pack compared to other countries.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That said, I think something has to change for affordability to improve. Historical precedence and international comparisons are important, but people generally have a strong recency bias. Since the Great Recession, as a country, we\u2019ve become accustomed to housing being more affordable than it is today. Most homebuyers don\u2019t remember the 1970s or 1980s. Instead, they remember the last decade when housing was relatively more affordable. As such, I believe demand will remain relatively low until affordability changes course and heads to a more normal level. The loss in demand will continue to put downward pressure on pricing in the housing market. Additionally, the Fed is likely to reverse course on interest rate hikes at some point, which would improve affordability, but that might not happen until 2024.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Of course, every market is going to behave differently. As we saw above, affordability in Pittsburgh is high, and therefore demand will probably not drop as much as it will in San Jose (which saw the largest month-over-month price declines from June to July 2022.) So it\u2019s very important to understand how affordable housing is in the markets where you invest. The <a href=\"https:\/\/www.nar.realtor\/research-and-statistics\/housing-statistics\/housing-affordability-index\" target=\"_blank\" rel=\"noreferrer noopener\">National Association of Realtors <\/a>(NAR) provides some really great data for this<\/span>.<\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">My personal hypothesis is that affordability will play a major role in regional housing markets for years to come. Some markets are just too unaffordable, and demand will drop to the point where prices fall. Some markets will see modest declines, and others will be more dramatic.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">On the other hand, affordable markets could see an uptick in demand. Work from home is here to stay for many companies, and I believe that more affordable cities will likely continue to see large levels of domestic migration, which will increase demand and put upward pressure on housing prices in those regions. These types of markets could continue to grow in the coming years, even as many major markets experience a correction.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">What\u2019s your hypothesis? Do you think housing affordability will worsen, and what role will it play in your local market? Let me know in the comments below.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"wp-block-group border border-gray-200 p-6 rounded-md has-slate-50-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n    \n  <div \n    id=\"segemnt-view-event-block_624f52525847f\" \n    class=\"  \"\n    x-intersect:enter.once=\"\n      analytics.track('On The Market Blog Sponsor View', {\n        referrer: 'https:\/\/www.biggerpockets.com\/blog\/most-affordable-housing-markets-in-the-world',\n              })\n    \">\n    \n  <\/div>\n  \n\n\n<h3 class=\"has-text-align-left mt-0 wp-block-heading\"><strong>On The Market is presented by Fundrise<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-1024x252.png\" alt=\"\" class=\"wp-image-142373\" width=\"256\" height=\"63\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-1024x252.png 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-300x74.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black-768x189.png 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/04\/Fundrise-logo-horizontal-fullcolor-black.png 1380w\" sizes=\"auto, (max-width: 256px) 100vw, 256px\" \/><\/figure>\n\n\n\n<p class=\"mb-0\" style=\"font-size:16px\"><strong>Fundrise is revolutionizing how you invest in real estate.<\/strong><\/p>\n\n\n\n<p class=\"mt-0 has-slate-600-color has-text-color\" style=\"font-size:16px\">With direct-access to high-quality real estate investments, Fundrise allows you to build, manage, and grow a portfolio at the touch of a button. Combining innovation with expertise, Fundrise maximizes your long-term return potential and has quickly become America\u2019s largest direct-to-investor real estate investing platform.<\/p>\n\n\n\n<div id=button-custom-event-block_624f4a1837234 class='button-custom-event'>\n      <a href=\"https:\/\/t.sidekickopen84.com\/s3t\/c\/5\/f18dQhb0S7kF8cpngfW16gy-_59hl3kW7_k2841CX6NGN35Qwt3rN_mgW56Jw3w1HcgXpf197v5Y04?te=W3R5hFj26QkH2W4hJTY63T3pkxW3Fbt5S3Cdl5cf49M_4s04&#038;si=8000000019411002&#038;pi=6988e0ed-1aea-4af5-9769-8a0de4675eeb\" x-on:click=\"window.analytics.track(&#039;On The Market Blog Sponsor Click&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/most-affordable-housing-markets-in-the-world&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\" rel=\"noopener\">Learn more about Fundrise<\/a>\n  <\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Housing affordability in the United States has steadily declined throughout 2022 as prices and interest rates continue to rise. Affordability plays an enormous role in the housing market&#8217;s direction, and [&hellip;]<\/p>\n","protected":false},"author":108611,"featured_media":144563,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,7119],"tags":[],"class_list":["post-144547","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/144547","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/108611"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=144547"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/144547\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/144563"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=144547"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=144547"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=144547"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}