Cities offering affordable homeownership options identified

For many Americans, housing is the largest monthly expense. However, several cities in the Midwest and East offer relief from mortgage burdens by leaving more money in homeowners' pockets. Detroit has been identified as the most undervalued housing market in the U.S., with typical homeowners spending only 17% of their per capita income on housing expenses. This analysis comes from data by the U.S. News Housing Market Index.

An undervalued housing market is where households spend significantly less on housing costs as a share of income than the national average. According to the Department of Housing and Urban Development, households that spend over 30% of their gross monthly income on housing are considered "cost-burdened." The national average for homeownership is about 36%, based on figures from November 2024.

Payment-to-income ratios can vary widely between metros. For instance, first-time homeowners in Boston were spending 66% of their monthly income in 2024, according to NerdWallet.

Four out of five most undervalued markets are located in the Midwest's Rust Belt, with Detroit leading with a payment-to-income ratio far below the national average. Following Detroit at No. 2 is Cleveland, where homeowners spend 19.1% of their income on housing-related expenses, while Philadelphia follows closely at 19.9%.

"Homes in Detroit and Cleveland are low-priced relative to both the country and to local incomes," says Realtor.com senior economic research analyst Hannah Jones. She attributes this to past economic challenges that led to falling local populations and lower housing demand, keeping prices low for two decades.

Jones notes that both cities have been experiencing a resurgence due to new economic opportunities and low living costs attracting affluent buyers. "As a result, strong local income levels and ample housing supply has kept home prices low," she adds.

St. Louis and Oklahoma City round out the top five undervalued markets with payment-to-income ratios of 20.7% and 23.2%, respectively.

Recent data from Realtor.com shows that over 62% of households in Detroit and St. Louis can afford a home, needing a median household income below $73,000.

In terms of renting, Detroit also tops the list for most undervalued rental markets with a payment-to-income ratio of 19.1%. Columbia, SC ranks second at 19.9%, followed by Philadelphia, Cleveland, and Chicago at just over 22%.

House hunters might consider buying instead of renting in these markets since owning typically costs about 4.2% more than renting nationally but is nearly 8% less expensive than renting in Detroit.