by Prashant Gopal
Thursday, September 4, 2008provided by
Stacy Williams owns a three-bedroom house with a full basement and central air-conditioning in a quiet neighborhood on the upper west side of Youngstown, Ohio.
Williams, now 33, was earning $8.05 an hour as a manager at McDonald's when she moved into the house with her husband, a laborer at a construction equipment manufacturer, and son back in 2004. The couple's combined annual salary was $33,000. But the purchase didn't require much of a financial stretch: The house cost $48,000. "If you have the credit score to do it, there's nothing that can stop you from buying a home in Youngstown," said Williams, whose plans for the house include a second bathroom.
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A fallout from the real estate slump is that once again many homeowners are forced to look for homes that are within their budget. Access to cheap adjustable-rate mortgages gave many Americans the chance to live in homes that under normal circumstances they could have never afforded. People such as the Williamses are lucky that their income matches up well with the average home prices in Youngstown, but if they had lived somewhere more expensive, they might not have been able to buy their own home or would have spent too much, and now could have been facing the prospect of foreclosure.
So what metro areas are most and least affordable? The Youngstown metro area, which has a median income of $52,000 and a median home price of $77,000, is the second most affordable metro area in the U.S., according to the new National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) for the second quarter. BusinessWeek.com used the index to rank the 10 most affordable and 10 least affordable major metros based on incomes and home prices. Indianapolis was the most affordable—91.6% of homes sold in the second quarter could be afforded by median-income households. The least affordable was the New York City-White Plains (N.Y.)-Wayne (N.J.) metro area, where only 11.4% of homes are affordable to median-income earners. (A decade ago, 66.4% of New York-area homes were affordable).
Affordable Youngstown
The New York area became the least affordable large metro in the country for the first time in the second quarter, largely because home prices in the costly California markets have been plummeting. Los Angeles had been the least affordable large metro since 2004, and California markets have topped the list since at least 1991. Unlike other bubble markets, home prices soared in the New York area during the boom but haven't fallen as far as they have elsewhere.
The most affordable markets, on the other hand, haven't changed very much. They didn't appreciate much during the boom, and most aren't seeing dramatic declines. "The most affordable places are mostly where there are no job markets," said Gopal Ahluwalia, vice-president for research for the National Association of Home Builders. "There's little demand.…Nobody moves to a market because housing is cheap. The movement is for jobs."
Tibitha Matheney, the agent with ERA Tri-Sun Real Estate in Youngstown who helped Williams buy her house, said she represented two other McDonald's workers who bought homes. She said she has shown customers houses that cost as little as $9,000. The former steel town has struggled in recent decades as that industry has declined and sent jobs overseas. The largest employer is now a General Motors plant.
Matheney adds that some residents take advantage of the low-cost housing in the Youngstown area and commute to job centers in Akron, Cleveland, and Pittsburgh. "You can get a lot of house if you really look," she said. "A lot of times, people say, 'But it won't appreciate.' But it's still worth it because it's affordable." The most expensive homes in Youngstown cost about as much as starter homes in New York City, and you couldn't even buy a parking spot in New York for what a median-priced house costs in the working-class Ohio town.
Buyer's Blues in New York
Longtime Manhattan renters Olive Hayes, 64, a New York City nurse, and her husband, Kevin, a Verizon employee, were hoping to spend no more than $450,000 when they started looking for a house more than a year ago. Hayes said she wanted a large apartment with a terrace and a separate living room and dining room. They wanted to buy, in part, because Hayes plans to retire and they will have to give up the spacious two-bedroom apartment they rent from the hospital. It's located in a doorman building overlooking the East River on 96th Street and First Avenue.
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On Aug. 25, the Hayeses closed on a one-bedroom pad in a newly built condo building eight blocks north of their current home. It doesn't have a terrace and is about 764 square feet, much smaller than what Olive Hayes had originally hoped for. It's going to be a tight fit for her plants and piano. "It's not easy. It would probably be $1.5 million for what I'm used to," she said.
Hayes' agent, Lynda D. Gray of Bellmarc Realty, said first-time buyers in New York often have to lower their expectations and stretch their finances. "The motivator is the investment," she said. "You're not going to have as much space as you like…but you're going to be able to sell for a profit and possibly buy something outside of the city."
The 10 Most Affordable Housing Markets
1. Indianapolis-Carmel, Ind.
Median home price: $108,000
Median household income: $65,100
Share of homes affordable to median-income families: 91.6%
Share of affordable homes in Q2 1998: 73.1%
2. Youngstown-Warren-Boardman, Ohio-Pa.
Median home price: $77,000
Median household income: $52,000
Share of homes affordable to median-income families: 90.1%
Share of affordable homes in Q2 1998: 80.1%
Wikimedia.org/Andrew BaletDetroit-Livonia-Dearborn
3. Detroit-Livonia-Dearborn, Mich.
Median home price: $92,000
Median household income: $54,400
Share of homes affordable to median-income families: 88.4%
Share of affordable homes in Q2 1998: 62.8%
4. Warren-Troy-Farmington Hills, Mich.
Median home price: $140,000
Median household income: $78,800
Share of homes affordable to median-income families: 86.8%
Share of affordable homes in Q2 1998: N/A
5. Grand Rapids-Wyoming, Mich.
Median home price: $112,000
Median household income: $59,200
Share of homes affordable to median-income families: 86.3%
Share of affordable homes in Q2 1998: 74.8%
Wikimedia.org/Joel RossolToledo
6. Toledo, Ohio
Median home price: $104,000
Median household income: $60,100
Share of homes affordable to median-income families: 85.5%
Share of affordable homes in Q2 1998: 77.3%
7. Dayton, Ohio
Median home price: $102,000
Median household income: $59,800
Share of homes affordable to median-income families: 85.4%
Share of affordable homes in Q2 1998: 83.8%
8. Akron, Ohio
Median home price: $100,000
Median household income: $61,700
Share of homes affordable to median-income families: 84.5%
Share of affordable homes in Q2 1998: 69.6%
Syracuse
9. Syracuse, N.Y.
Median home price: $98,000
Median household income: $61,000
Share of homes affordable to median-income families: 84.2%
Share of affordable homes in Q2 1998: 83.6%
10. Scranton/Wilkes-Barre, Pa.
Median home price: $91,000
Median household income: $54,700
Share of homes affordable to median-income families: 82.5%
Share of affordable homes in Q2 1998: N/A
View the 10 least affordable housing markets.
Editor's Note: The metropolitan statistical areas (click here to learn more about MSAs) included in this story were ranked based on the share of homes sold in the second quarter of this year that would have been affordable to a family earning the local median income. Affordability is calculated by comparing the median household income to housing costs, assuming that a family can afford to spend 28% of its gross income on housing. The housing costs were calculated using sales records supplied by First American Real Estate Solutions and include principal, interest, estimated property taxes and insurance. It's based on a 30-year fixed rate mortgage for 90% of the sales price. The interest rate is a weighted average of fixed and adjustable rates during the quarter as reported by the Federal Housing Finance Board. The median household income estimates are published by the Department of Housing and Urban Development. The ranking only includes metro areas with at least 500,000 people.
Source: National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index
Gopal writes about real estate for BusinessWeek.com in New Yo
Mikel Angh 
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