According to a recent report, Chicago, Detroit and St. Louis are three of the most affordable real estate markets for home buyers, as of Q1 2015.
Apparently, the Midwestern United States is a very affordable place to live, especially where home prices are concerned. A recent report showed that the three most affordable housing markets in America (during the first quarter of 2015) are all located in the Midwest. St. Louis, Missouri; Chicago, Illinois; and Detroit, Michigan were named the most affordable cities for home buyers.
The report was released last week. It was a joint effort conducted by two housing information companies, RealtyTrac and Clear Capital.
According to the authors: “At the national level, buying an average-priced home in the first quarter of 2015 was the most affordable it’s been in two years and nearly twice as affordable as it was in the second quarter of 2006…”
This comes in spite of home price increases that have occurred over the last year or so.
But that’s not to say home buying is affordable for everyone. In some cities, like Brooklyn and San Francisco, residents with an average income (for their area) simply cannot afford to buy a house. The average-income buyers who do purchase a house end up using most, if not all, of their wages to cover the mortgage payments. In such cities, home buying is often limited to residents with above-average incomes.
But let’s get back to those affordable real estate markets.
Three Most Affordable Housing Markets
As mentioned, the report named St. Louis, Chicago, and Detroit as the three most affordable housing markets. In these metro areas, homes are much more affordable in relation to average wages.
To determine the rankings, RealtyTrac analyzed average weekly wage data for the first quarter of 2015, provided by the Bureau of Labor Statistics. They compared this to the average price of a single-family home or condo in each city.
So we’re not necessarily talking about the “cheapest” housing markets in the U.S. The report simply identified areas that were affordable based on the average wages of residents.
In Chicago, for example, the median sale price between June and September of this year was $270,000, according to Trulia. That’s hardly the cheapest real estate market in the country. But it is one of the most affordable based on average incomes in the area. So it’s all relative.
Home Price Predictions for Chicago, Detroit and St. Louis
Here are some recent predictions for home prices in Chicago, Detroit and St. Louis. These predictions were based on data provided by the real estate information company Zillow, in October 2015.
Chicago: According to Zillow, home prices in Chicago rose by around 6.5% over the last year or so (Oct. 2014 – Oct. 2015). The company expects house values to rise by a more modest 3.4% over the next 12 months. They labeled this market “hot” and also called it a sellers’ market.
Detroit: By Zillow’s estimation, home prices in Detroit, Michigan actually declined by -2.4% over the last 12 months. Their one-year forecast calls for house values to remain mostly flat. If this prediction is accurate, it means that the Detroit housing market could remain on the “most affordable” list into 2016.
St. Louis: The company reported a 3.5% increase in St. Louis home prices over the last year or so. Going forward, they expect values to rise by another 2.2% over the next 12 months (Oct. 2015 – Oct. 2016).
Granted, these are just housing predictions — not facts. So you shouldn’t bank on them. But they do give us a sense of where these markets have been, and where they might be headed in 2016. As for now, they are three of the most affordable real estate markets in the country, according to RealtyTrac and Clear Capital.
According to Alex Villacorta, vice president of research and analytics at Clear Capital, there is a lot of room for growth in many parts of the Midwest.
“Conversely, favorable buying environments in Midwest markets like Detroit are a reflection of the long runway for growth still present in major metros,” he said.