What Determines Affordability?

Recently we’ve looked at studies detailing the Most Affordable areas for the middle-class and the Least Affordable. But just what determines this “affordability”?

First of all, affordability is more than just price; it includes monthly payments of insurance, property taxes, and, of course, mortgage.

Second, it really comes down to the age-old principle of supply-and-demand. The least affordable areas (i.e. California) tend to add less than 10 new units for 1000 existing units each year. This, of course, drives prices up and often results in those “bidding wars” we’ve heard so much about these last few years.

Finally, since income tends to be tied closely with education, it stands to reason that areas with a higher education rates tend to be more affordable. Well, yes to a point. In Washington, DC, for example, 83% of the homes on the market are accessible to households with a graduate degree while in San Francisco that number shrinks to 44%.

So the middle class dream of owning a home is still within reach – it just depends on which section of the country you’re doing the reaching.

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