A pandemic boom has made Miami the least affordable US city – Quartz

RealtyHop calculated housing affordability for the 100 biggest cities in the US by comparing home sale prices to median incomes to estimate how much of a household’s monthly budget they would have to put towards a mortgage and taxes if they bought a typical house. Conventional wisdom holds that no more than 30% of a household’s gross income should go towards housing. In reality, however, many Americans are having to spend much more—In 2018, 21% of US homeowners were considered “burdened,” meaning they spent more than 35% of their income on housing.

In Miami, as in New York and Los Angeles, median earners would have to spend well above 70% of their income to buy the median house. But during the pandemic, housing costs in Miami have been outpacing these other expensive cities. The price of homeownership in Miami has risen 17% since March 2019, compared to 8% in New York and 5% in Los Angeles.

Miami’s real estate market has been white-hot since the pandemic spread across the US in April 2020. Although new home construction in the city is skyrocketing—housing starts in June 2021 tripled the total from June 2020—demand for housing in Miami has spiked even faster. As a result, the city’s housing inventory is running low and more buyers are making cash offers and driving up the price of homes in bidding wars. Luxury real estate has been especially hot: In December 2021, Ken Griffin, the CEO of the hedge fund Citadel, broke South Florida real estate records when he paid $75 million for a house on Star Island (the celebrity-studded retreat of stars like Jennifer Lopez, Shaquille O’Neal, and Gloria Estefan).

Declining affordability across the US

Miami is only the most extreme illustration of macroeconomic forces driving up home prices across the US. Pent-up demand building for years exploded when the pandemic sent many white-collar workers looking for more space to be able to work from home. At the same time, new construction slowed as labor shortages and supply chain delays for building materials made homes more expensive to build. Lumber prices surged 500% from the previous year in the spring of 2021 as low supply in lumber yards hit increased demand from home builders.

A separate affordability index created by the National Association of Home Builders and Wells Fargo used a different methodology to calculate housing affordability but still found many of the “usual suspects” to be among the least-affordable places in the country: coastal cities like Los Angeles, San Francisco, New York, and Miami were all at the bottom of the affordability ranking. This index analyzed median home sale prices for entire metro areas—not just individual cities—and measured affordability in terms of how many homes in the area’s for-sale market would be within reach for median earners. According to this analysis, the Los Angeles metro area was the least affordable: only 8% of homes on the market were affordable for median earners. The Miami metro area ranked 203rd from the bottom out of 237 areas.

Still, this analysis told the same story for US housing markets as a whole: year over year, homes across the US are becoming less affordable to many Americans as prices increase and income hasn’t kept up.

Source: news.google.com