Housing costs burden US families; Midwest offers relief

Families across the United States are spending a significant portion of their income on housing, according to the National Association of Home Builders/Wells Fargo Cost of Housing Index (CHI). A family earning the national median income of $97,800 would need to allocate at least 38% of their earnings to cover mortgage payments for a median-priced new home in the third quarter. This figure is slightly lower than in the second quarter but still poses a challenge for many.

For low-income families, defined as those earning 50% of the median income, housing costs are even more burdensome. These families would have to spend 75% of their income on a new home.

Realtor.com® senior economist Ralph McLaughlin notes that "a combination of stubbornly high mortgage rates and stubbornly high prices has put homeownership out of reach for a large majority of households along the costly coasts." He highlights California and the Northeast as particularly challenging regions where few households can afford a median-priced home.

In ten out of 176 markets, typical families are severely cost-burdened, spending over 50% of their income on housing. In another 85 markets, they are considered cost-burdened, paying between 31% and 50%.

California cities dominate the list of most cost-burdened areas. Jameson Tyler Drew, a real estate investor from Los Angeles, explains that "you either have to make a lot of money to live in California or you have to have gotten into the market long ago to afford it." He adds that an annual income near $250,000 is necessary just to enter the housing market.

San Jose-Sunnyvale-Santa Clara tops the CHI list with families needing 85% of their income for mortgage payments. Other expensive markets include Honolulu, San Diego-Chula Vista-Carlsbad, San Francisco-Oakland-Berkeley, and Miami-Fort Lauderdale-Pompano Beach.

Conversely, there are more affordable markets primarily located in the Midwest. Decatur, Illinois ranks as the least cost-burdened market with families spending only 16% of their income on housing. Other affordable areas include Cumberland (MD-WV), Springfield (IL), Elmira (NY), and Peoria (IL).

In these regions, even low-income families face less financial strain compared to other parts of the country.

The findings suggest that while some regions present significant challenges for prospective homeowners due to high costs, others offer more accessible opportunities for families seeking affordable housing options.