A Decade in Housing Unaffordability: Mortgage Burden Worsens in 51 of 100 Largest U.S. Cities

From Point2Homes.com, January 4, 2021

Despite mortgage rates reaching historic lows, mortgage affordability continues to erode in the country’s largest and most in-demand cities. In a year as volatile and uncertain as 2020, the effect of lower mortgage rates was muted by soaring home prices, increasing demand and tight supply.

In fact, the share of income needed to afford housing continues to increase and monthly mortgage payments are becoming a financial burden in more cities across the nation. For example, in 2010, homeowners in 13 large cities paid more than 30% of their income to cover the mortgage. Now, in 2020, new homeowners in no fewer than 15 cities are financially burdened by their recently acquired mortgages.

Our latest study shows that the increase in income is no match for the rapidly increasing home prices in the 100 largest U.S. housing markets. And this disparity between galloping home prices and slower-moving incomes means that mortgages take up incrementally more of homeowners’ hard earned money each year. It also means that the number of unaffordable cities, where homeowners spend more than 30% of their income to cover the mortgage alone is going up as well….

The Number of Unaffordable Markets Goes From 13 in 2010 to 15 in 2020

Compared to 2010 — when San Francisco and New York City homeowners dished out 43% and 42%, respectively, of the median income to cover the mortgage — in 2020, owners in both cities are looking at a slightly improved situation: the mortgage currently eats up a little less (39%) of the median income in these cities.

Newark, N.J., is the only city to leave the list of unaffordable markets. While 2010 mortgages took up 34% of residents’ income, 2020 mortgages — representing only 27% of the median income — are a definite improvement.

The three markets that did not make the most unaffordable cities list in 2010 are Santa Ana, San Jose and Fremont, all in California. In 2020, however, they crossed the 30% mark, joining veteran unaffordable markets like San Francisco, New York City and Honolulu, HI.

In fact, Hawaii’s capital and largest city was the third-most unaffordable large U.S. city in 2010, but it reached the top position on this infamous list this year. Moreover, although the majority of the cities in the list have seen some fluctuations, Honolulu is the only city where mortgages have taken up more than 40% of homeowners’ incomes in 2010, as well as in 2015 and 2020….

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