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For Housing Affordability, You’d Rather Be in Lima, Ohio, Than Santa Barbara, California

“Despite some of the best financing conditions in decades, housing affordability at the national level has fallen to the point that only a little more than half (50.4%) of all homes sold in this country during the third quarter of 2004 were affordable to families earning the median U.S. household income,” said NAHB President Bobby Rayburn. “This compares to about 61% of homes sold that were affordable to median income earners in the year’s first quarter.”

Strong home-price appreciation, which outpaced income growth in many areas, was the main factor for affordability slipping.

“In many markets, working families are finding it considerably more difficult to afford homes today than they did at the start of 2004,” Rayburn noted. “Ultimately, higher home prices are a matter of strong buyer demand. But a big contributor has been a shortage of land available for development due to growth controls, and the high cost of regulations in general. This includes everything from excessive impact and utility hookup fees to the price of long delays for subdivision approvals. Local jurisdictions that have curtailed production of affordable and workforce housing through excessive regulations should consider this a wakeup call.”

In Lima, OH, 90.5% of homes sold during the third quarter were affordable under current mortgage financing conditions to families earning the area’s median income of $52,500. But affordability was down even in that small market of fewer than 250,000 residents, with the median price of a home climbing to $82,000 in the year’s third quarter, up from $78,000 in the first, when 92.4% of Lima’s homes were affordable.

Ranked just after Lima for affordability in the small cities category were Cumberland, MD, and Mansfield, OH. Among mid-sized cities (with 250,000 to one million people), Saginaw-Bay City-Midland, MI, was the most affordable housing market and the second-most affordable overall. It was followed by the mid-sized markets of Lansing-East Lansing, MI, and Canton-Massillon, OH. Among major metros with populations over one million, Grand Rapids-Muskegon-Holland, MI, was tops for affordability, followed by St. Louis.

Earning the dubious honor of least affordable housing market in the third quarter was the metro area encompassing Santa Barbara, Santa Maria and Lompoc, CA, where less than 5% of homes sold were affordable to families earning the median household income of $64,700 and the median sales price was $447,000. This marks a substantial drop in affordability for that area since 2004’s first quarter, when the median price was $380,000 and nearly 11% of homes sold were affordable to median-income earners.

In San Francisco, which previously held the title of least affordable housing market, the median sales price remained the highest of the 163 metro areas that were ranked. However, the city’s high median household income of $95,000 kept it slightly lower on the list, as the nation’s 11th least affordable housing market.

“All of the 10 least affordable housing markets — and 19 of the 25 least affordable — are in California, which is one of the most highly regulated areas in the country,” Rayburn said.

The most affordable housing markets by region were: Lima in the Midwest; Cumberland in the South; Pueblo, CO, in the West; and Harrisburg-Lebanon-Carlisle, PA, in the Northeast. The least affordable regionally were: Chicago in the Midwest; Naples, FL, in the South; Santa Barbara in the West; and Nassau-Suffolk, NY in the Northeast.

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