Oye! News from America
Category: America Published on Wednesday, 30 January 2013 09:29 Written by Glen Asher
Once again, Demographia has released its annual International Housing Affordability Survey, its ninth annual look at the housing markets in Australia, Canada, Hong Kong, Ireland, New Zealand, the United Kingdom and the United States. In this posting, I'll provide you with a brief comparison of the affordability of the real estate markets in each of the countries and then take a more detailed look at the most and least affordable real estate markets in the United States.
As I've told my regular readers on previous occasions, Demographia uses a unique approach to calculating real estate affordability. They use a term "median multiple" which is the median house price in a given market divided by the median gross (before tax) household income in that market. They then divide the resulting median multiples into four brackets as follows:
In this year's study, Demographia examines the real estate markets in 337 metropolitan areas in the seven aforementioned countries.
Here is a summary of the affordability of all 337 real estate markets in all seven nations for all metropolitan areas:
Here is a chart showing how overall nationwide affordability in these markets has changed over the past eight years:
Notice how affordability in the United States has increased from a median multiple of 4.6 in 2005 to a median multiple of 3.1 in 2012? Right now, residential real estate in the United States is considered to be just on the margins of the affordability cut-off, a bargain compared to the real estate in Australia, New Zealand and the United Kingdom. You will also note the massive readjustment of the market in Ireland; when the bottom fell out of the Celtic Tiger, real estate prices plummeted by more than 52 percent to their current level and, have fallen by an additional 14 percent on a year-over-year basis. That said, compared to last year, housing affordability declined in the 51 major metropolitan markets (population greater than 1 million) from a median multiple of 3.1 to 3.2.
Just for fun, here are the ten least affordable real estate markets among all seven nations in the study:
Now let's look at the most affordable American metropolitan real estate markets when measured using the median multiple metric and how affordability has changed on a year-over-year basis:
The top 20 most affordable real estate markets among the seven nations in the study are all in the United States, many of them located in the economically depressed industrial heartland of Michigan, Ohio, Indiana and Illinois. As noted above, out of 216 U.S. markets in the study, 100 or 46.3 percent of the total are considered to be affordable, by far the highest percentage of affordable markets in all seven nations.
Here is a list of the ten least affordable American real estate markets and how affordability has changed on a year-over-year basis:
What is surprising is to see how affordability in some markets has declined over the past year alone; the median multiple in Santa Barbara rose by 3.1 to 7.9, moving it from the moderately unaffordable category well into the severely unaffordable category and the median multiple in Santa Cruz moved up from 6.6 to 8.2, pushing real estate in that market even further into the severely unaffordable category. Please note that a movement of 1.0 in the median multiple is equal to an entire year of a household's wages, not an insignificant amount by any measure! Four out of six of the severely unaffordable markets are located in coastal California with the median multiple in both San Francisco and San Jose rising to 30 percent or more than at any point during the housing bubble.
While the most recent Case-Shiller report shows that housing prices in the 20-City Composite have risen by 5.5 percent on a year-over-year basis in November as shown here...
...the Demographia study shows that real estate affordability in the United States varies widely and, depending on where you live, may be either severely unaffordable or very cheap when compared to the income level of those who live in the area. After all, in large part, it was the severely unaffordable real estate in the sun and sand states that was responsible for much of the precipitous decline in America's housing market and, from this data, we can see that history may be repeating itself.
Click HERE to read more of Glen Asher's columns
Oye! Try something new
Oye! Worth a try!
Oye! Take a look
Oye! Go For it!
Oye! Top Ten
Just what you need
We also recommend
No events found.