Certain housing markets are more affordable than othersDate posted: 12/1/14 08:15:00 AM
St. Louis is one of the most affordable cities for home ownership in the nation, according to a recent study.
The 2014 Home Affordability Study, which was recently released by Interest.com, showed St. Louis as the third most affordable city for homeownership among the nation's 25 largest metro areas.
St. Louis, the second largest city in Missouri, ranked behind only Minneapolis and Atlanta. The city was high on the list due to a median household income that exceeds the median price of a home by 20.46 percent. That's a slight rise from 2013, according to the results.
Minneapolis had the best ratio at 23.22 percent and Atlanta was just behind at 21.62 percent. No other major metro area was within six points of the top three.
"In the least affordable cities, it's not uncommon for families to spend 50 percent or 60 percent of their income on housing costs," said Mike Sante, managing editor of Interest.com. "I've even had San Franciscans tell me that they must devote 70 percent of what they make to keep a roof over their head - and they were renting. Owning is out of the question."
However, St. Louis is bucking the trend and affordability isn't out of the question for many working families. At $149,900, the median home price in St. Louis is one of the most affordable in the country. That price even accounts for the 9.74 percent increase in home values from the year prior. Only Detroit and Pittsburgh offered cheaper housing options among major metro areas.
What pushed Minneapolis to the top?
Minneapolis took the lofty spot on the list thanks to a high median income. The median employee in Minneapolis makes $67,194, or approximately $15,000 more than the national average.
"We've got a pretty diverse economy here, a lot of medical tech, a lot of corporate headquarters, so a fair number of people have a higher income," Herb Tousley, director of real estate programs at the University of St. Thomas in Minneapolis, told Interest.com.
It also helps that the Twin Cities avoided a major crash after the Great Recession. Unlike cities in the West, there wasn't much boom or bust in Minneapolis.
"We're seeing (working) couples, first-time buyers, that are targeting homes they can afford on one income," said Emily Green, president of the Minneapolis Area Association of Realtors.
Home values and wage growth
Home prices climbed six percent in the nation's 25 largest markets and four percent nationally, according to the study. That's a much more gradual rise than the previous year when home prices increased 15 percent in the 25 largest markets and 12 percent nationally.
While the slow and steady rise of home values is better for the housing market than the rapid rise in 2013, American wages still had trouble keeping up with the steady rise of appreciation. Incomes grew a bit more than two percent in the 25 largest markets and just under two percent throughout the nation.
"Affordability would improve at a faster pace if wage growth would pick up," Adam DeSanctis, economic issues media manager for the National Association of Realtors, told Interest.com. "We've seen an improvement in job growth, but wages have remained somewhat static."
According to Sante, buying a decent home continues to be a major hurdle for many people living in one of the nation's bigger metro areas.
"In those cities with the least affordable housing, the failure of paychecks to keep up with rapidly rising housing costs is reaching crisis proportions," Sante said.
Regulatory responsibilities are a key factor when calculating the cost of renting or owning a home, according to The Washington Post. Approximately one-fourth of the cost of a new single-family home goes to federal and local building regulations. Thus, the Post reported home prices tend to be more in larger cities that have to deal with larger regulation guidelines.
- Winterizing your home and finances - 12/12/17
- Retirement plan options - 11/29/17
- Best time to buy a car: December - 11/29/17
- 6 sustainable ways to save during the holidays - 11/9/17
- Steps that can help prevent identity theft - 11/2/17