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The dream of owning a home is becoming increasingly difficult to achieve for metropolitan areas, according to a new study conducted by finance site Interest.com.
The 2014 Home Affordability Study measured the affordability grade and paycheck power rating of 25 metropolitan cities with statistics from 2012-2014.The affordability grade used common letter grades such as A, B, C, D, and F. A grade of ‘C’ indicated that a person making a median income can afford a median-priced home. Interest.com used percentages to reflect the paycheck power rating; a percentage indicated how much the median income in the city exceeded or fell short of the income required to purchase a median-priced home.
The study used “city-specific data on median home prices and incomes, average property taxes and insurance costs, as well as consumer debt and mortgage rates,” according to the site.
Since the study began in 2012, all 25 metropolitan cities exhibited a consistent increase in the percentage of incomes that fell short of what is required to buy a median-priced home. Most notably, San Francisco and San Diego have received F grades all three years of the study. New York City, a city notorious for its small yet high-priced properties received straight Fs through 2014 as well.
With dense concentrations of jobs in metropolitan areas, many people are flocking to major cities but have struggled to secure affordable housing. Silicon Valley, an area spanning the southern vicinity of the San Francisco Bay Area, has grown exponentially the past decade due to the popularity of technology start-ups.
Home to technology giants such as Facebook, Google, and Apple, the price of housing in Silicon Valley has skyrocketed. It is no surprise that San Francisco has the worst paycheck power rating with 45.64% of the median income falling short of the income required to purchase a median-priced home.
Of the 25 listed cities, only 10 emerged with an affordability grade of “C” or higher. These cities include Atlanta, Baltimore, Detroit, and Minneapolis. Minneapolis boasted the best affordability with 23.22% of the median income exceeding the income required to purchase a median-priced home.
With a majority of the survey featuring cities diving deeper into failing grades, it is clear that as long as the median income remains disproportionate to the rising costs of property, the disparity highlighted in the Home Affordability Study will continue to grow.
To view a complete list of cities and their grades, click here.