Cities with the Least Affordable Housing

The housing market must really be back —

homes prices in a majority of

America’s big cities are becoming unaffordable.

Home prices and mortgage rates have increased at a faster pace than the increase in family income in all of the 25 largest metropolitan areas, according to Interest.com’s second annual Home Affordability Study. In only eight cities the median-priced home was affordable for a family earning a median income. Last year, that was true in 14 cities.

Home prices are up nearly 16% over the last year; however, incomes rose by just 3%, according to Interest.com, which puts homeownership largely out of reach for many families.

Interest.com assigned grades to all 25 cities with a C meaning that someone making the median income can afford a median-priced home. Just a third of the cities actually received a C or better, meaning the majority of cities are unaffordable.

Overall, five cities in the study received failing grades for affordable home prices, compared with three last year. Furthermore, home prices have increased so much that no cities received an A or A- despite three ranking as such in 2012.

Interest.com also gave each city a Paycheck Power Rating, which is the percent the median income exceeds or falls short of the income required for a median-priced home.

Based on Interest.com’s study, Detroit, despite its economic troubles, is quickly becoming unaffordable. In 2012 the median income exceeded the income required for a median-priced home by 45.32%, by far the largest gap on the list. However, in 2013, that changed drastically—now median income only exceeds by 16.87%. As a result, Detroit’s grade went from an A to a B.

In Phoenix, the housing is only barely affordable, with the paycheck power rating dropping from +23.53% to just +8.32% — a change from a B+ to a C.

5. Miami

Paycheck power rating 2013: -24.65%

Paycheck power rating 2012: -12.59%

Grade 2013: F

Grade 2012: D-

Median home price: $200,000

Price change in 12 months: +20.7%

Ocean Drive on South Beach

According to Census.gov, the median household income in Miami in 2011 was $43,957, which is stagnant over the last year. However, according to a CBS Miami report, the median household income is down more than 11% from when it was $50,700 in 2000.

4. Los Angeles

Paycheck power rating 2013: -30.31%

Paycheck power rating 2012: -12.52%

Grade 2013: F

Grade 2012: D-

Median home price: $515,000

Price change in 12 months: +22.6%

Rodeo Drive in Beverly Hills. Photo by John O’Neill.

The Los Angeles housing market saw the largest percentage point increase from 2012’s to 2013’s paycheck power rating. The median household income for Los Angeles for 2011 was $56,266. However, this varies widely from neighborhood to neighborhood. An LA Times map showed that the median income in Bel-Air was $207,938 and in Pacific Palisades it was $168,008, while in Westlake it was $26,757 and in East Hollywood it was $29,927.

3. New York

Paycheck power rating 2013: -35.82%

Paycheck power rating 2012: -29.71%

Grade 2013: F

Grade 2012: F

Median home price: $1 million

Price change in 12 months: +4.6%

Brownstones in Prospect Heights, Brooklyn

The median household income for 2011 in New York City was $56,951, which obviously doesn’t come close to the million dollar median home price. It’s likely no surprise that the gap between New York’s richest and poorest is increasing. In fact, according to a 2012 article in The New York Times, the income gap in Manhattan actually rivals the disparities seen in sub-Saharan Africa.

2. San Diego

Paycheck power rating 2013: -37.71%

Paycheck power rating 2012: -25.90%

Grade 2013: F

Grade 2012: F

Median home price: $425,000

Price change in 12 months: +16.4%

Lily pond in Balboa Park

In 2011 the median household income in San Diego was $63,857, well above the national average of $52,762. Even for residents not looking to own a house the city is unaffordable. The city has the third-highest rent in the nation.

1. San Francisco

Paycheck power rating 2013: -47.93%

Paycheck power rating 2012: -32.76%

Grade 2013: F

Grade 2012: F

Median home price: $830,000

Price change in 12 months: +13.7%

Houses on Lombard Street. Photo by Laura Joszt.

San Francisco’s median household income of $72,947 is fairly far above the national average, but the city still had the worst paycheck power rating out of the 25 metropolitan cities. The city is just seven miles by seven miles, plus the Bay Area is a high-tech center, which makes San Francisco very desirable.