The U.S. housing market presents a challenging puzzle for prospective homeowners and investors alike. While rising prices and mortgage rates continue to strain budgets, new analyses offer a nuanced view of affordability, revealing that California cities can be both the most and least accessible, depending on the metrics. For those seeking long-term investment value, understanding these contrasting perspectives and the consistent appeal of the Midwest is paramount.
The dream of homeownership has grown increasingly elusive for many Americans, with persistent high home prices and mortgage rates hovering around 7%. This challenging environment compels investors and homebuyers to scrutinize affordability metrics more closely than ever, leading to a fascinating, and at times contradictory, landscape across the country.
Recent studies from multiple financial analysts highlight varying approaches to defining “affordability,” leading to different conclusions for some major U.S. cities. For astute investors, navigating these distinctions is crucial for identifying genuine long-term value and sustainable growth opportunities in real estate.
Diverse Metrics, Divergent Results: Defining Affordability
The core of the discrepancy in affordability rankings lies in the methodologies employed by different studies. What one report deems “least affordable,” another might place higher due to mitigating factors.
- A WalletHub study, released in May 2025, focused on broad metrics including housing affordability (median house price divided by median annual household income), maintenance affordability, and average homeowner insurance costs. This study found that the most affordable cities are predominantly in the Midwest, while nine of the top 10 least affordable cities are in California.
- In contrast, a Redfin report from 2023, highlighted by GOBankingRates, focused specifically on the “share of income spent on monthly mortgage payments.” This report indicated that in 2023, someone making the median U.S. income of $78,642 would allocate 41.4% of their earnings to monthly mortgage payments on a $408,806 median-priced U.S. home, significantly exceeding the personal finance expert-recommended 28% rule.
- Most recently, a SmartAsset study utilizing 2024 Census Bureau data weighed median housing costs for both renters and homeowners against median household income. This approach yielded a different perspective, noting that while the median housing payment in the Bay Area is high (around $2,800), high local incomes mean cities like San Jose and San Francisco surprisingly land among the top 20 most affordable cities based on this specific income-to-cost ratio. For San Jose, homeowners represent 55.5% of households despite ongoing cost advantages for renters, demonstrating how local economic strength can reshape affordability.
The Unwavering Appeal of the Midwest for Value-Conscious Investors
Despite the varying methodologies, one consistent theme emerges: cities in the Midwest continue to offer compelling affordability for both residents and investors. These regions stand out for their accessible home prices and lower overall cost of living.
According to the May 2025 WalletHub study, Flint and Detroit, Michigan, topped the list of most affordable cities. Flint, with the lowest cost of living index in the country, boasts home prices accessible relative to median resident income. Both cities offer a low median home price per square foot—$61 and $87 respectively—and a vacancy rate of over 20%, indicating a buyer’s market. To put this into perspective, the report notes that prices in the most expensive cities can exceed $1,000 per square foot.
The 2023 Redfin report also echoed this trend, listing cities like Detroit, Michigan; Pittsburgh, Pennsylvania; Cleveland, Ohio; Philadelphia, Pennsylvania; and St. Louis, Missouri as the most affordable. These cities all featured median home sale prices below $300,000, significantly lower than the national median of $408,806.
Joy Aumann, a licensed realtor and co-founder of La Jolla Life, affirmed the potential for these Midwest markets in 2024, suggesting that they “will get even more affordable…as mortgage rates decline while more homes hit the market.” She specifically highlighted Pittsburgh and Cleveland as markets poised for improved affordability due to strong local economies attracting new residents, while acknowledging that aging housing stock and declining populations in cities like Detroit and St. Louis can limit drastic price surges. This indicates a stable, budget-friendly environment that could be attractive for long-term investors.
California’s Complex Housing Crisis: Pricey But Potentially Manageable for Some
While the Midwest consistently offers affordability, California cities often dominate the “least affordable” lists in terms of sheer price. The WalletHub study identified nine out of the 10 priciest spots as Californian, with New York as the lone outlier.
The 2023 Redfin report detailed the significant income share required for housing in these cities:
- Anaheim, California: 88.3% of income spent on monthly housing costs.
- San Francisco, California: 85.4% of income.
- San Jose, California: 73.0% of income.
- Los Angeles, California: 72.9% of income.
- San Diego, California: 64.6% of income.
These figures far exceed the 28% rule, underlining the severe cost burden for median-income earners in these areas. The state was already facing a housing crisis, a situation further exacerbated by devastating wildfires, which left many extremely low-income renter households with limited affordable and available housing options, as noted by the National Low Income Housing Coalition.
However, the 2024 SmartAsset study offers a counter-narrative, showing that high median household incomes in cities like San Jose ($148,226) and San Francisco ($139,801) allow residents to dedicate a smaller percentage of their gross income to housing costs (22.99% and 23.81% respectively), placing them in a more “affordable” category when income is factored in. This emphasizes that “affordability” is relative and heavily dependent on the local wage structure.
Investment Implications and Long-Term Outlook
For long-term real estate investors, these findings underscore the importance of looking beyond headline numbers and diving deep into specific market dynamics. The consistent affordability of Midwest cities, coupled with potential for further improvements in 2024 due to declining mortgage rates, positions them as attractive markets for stable cash flow and potentially gradual appreciation.
The 2024 SmartAsset study, leveraging data from the U.S. Census Bureau, identifies additional affordable spots. Beyond El Paso, cities like Louisville, KY (20.38%), Albuquerque, NM (20.54%), Mesa, AZ (21.36%), and Indianapolis, IN (21.82%) demonstrate favorable housing-to-income ratios, making them appealing for investors targeting sustainable growth and lower entry costs. On the other end of the spectrum, Miami, Florida, stands out as the most expensive city in the SmartAsset study, with over 36% of gross income going to housing costs, primarily driven by rising rents.
Understanding the interplay between median home prices, median income levels, and the cost of living—including property taxes, insurance, and utilities—is paramount. The “28% rule” remains a critical benchmark for individual financial health, but market-wide affordability requires a broader, multi-faceted analysis. As the financial landscape continues to evolve, keeping an eye on these nuanced metrics will be key to unlocking successful real estate investment strategies.
For a detailed breakdown of 2024 housing costs relative to income in U.S. cities, the full SmartAsset report is a valuable resource for investors looking to make informed decisions for long-term growth. The Redfin report also offers granular 2023 data for many cities, providing essential historical context for market trends, as highlighted by GOBankingRates.
