2023’s Most Affordable Cities For Home Buyers

Median home sales prices have skyrocketed from $313,000 in Q1 2019 to $436,800 in Q1 2023

Home prices surged over the last few years during the COVID-19 pandemic, with the median sales price skyrocketing from $313,000 in Q1 2019 to $436,800 in Q1 2023. While prices may be starting to lower in some parts of the country this year, interest rates have rapidly climbed. For example, the average 30-year fixed mortgage rate shot up from a historic low of 2.65% in January 2021 to 6.39% in May 2023.

With the combination of inflated prices and high interest rates in play, many consumers may wonder if they can even afford to buy a home. Fortunately, owning real estate in some cities is much less expensive than others.

• Springfield, Illinois, has the most affordable housing (median house price divided by median annual household income), 1.67, which is 17.5 times cheaper than in Santa Barbara, California, the city with the least affordable housing, with a ratio of 29.24.
• Honolulu has the lowest median real-estate tax rate, 0.30 percent, which is 12 times lower than in Waterbury, Connecticut, the city with the highest at 3.59 percent.
• Flint, Michigan, has the highest rent-to-price ratio, 26.64 percent, which is 16 times higher than in Santa Monica, California, the city with the lowest at 1.66 percent.
• Miami Gardens, Florida, has the highest median home price appreciation, 94.61 percent, which is 59.1 times higher than in Hampton, Virginia, the city with the lowest at 1.60 percent.
• Miami Beach, Florida, has the highest vacancy rate, 35.24 percent, which is 17.4 times higher than in South Gate, California, the city with the lowest at 2.02 percent.

Expert Commentary

What should home buyers consider when choosing a city to settle down in?

“Try to predict how long you will be in that particular city. Will this be a shorter or a longer stay? In the case of the latter, will there be life changes along the way, for example, an alternative career or retirement? If so, amenities may be valued differently. For example, busy professionals may appreciate access to public transportation (such as Amtrak) or an airport which will help them attend conferences. On the other hand, retirees may appreciate access to community centers, libraries, or universities to take classes or mingle with other community members.”
Katrin B. Anacker – Professor, George Mason University

“Short of being retired, the city you live in will probably be driven by your job opportunities or job offer, unless you are one of the increasing numbers that has made a business out of online or remote work/consulting. So, this is a pretty broad question. That said, you should be looking at the cost of housing, crime rates, school system, cost of living in general for the area, and other basics. And…ask yourself is this the sort of community you want to live in?”
James Refalo – Professor, California State University, Los Angeles 

What are some housing market predictions for 2023?

“2023 will be a transition year to a more normal marketplace for housing, however, it will likely remain inflated because of inflation in materials and labor. There is still a huge demand for housing at the bottom of the pricing sector. We will see less pricing increases at the top of the pricing sector. The middle sector will become more normal. So, the narrative is really 3 separate markets. The bottom will remain less affordable and tough to buy, the middle will normalize, and the higher-priced homes will likely be bargains.”
J. David Chapman, Ph.D. – Owner/Broker, Realty1, LLC; Professor, University of Central Oklahoma; Real Estate Commissioner, State of Oklahoma

“The easy prediction is that markets with strong job growth will continue to see strong housing price increases. The markets with strong job growth are larger (New York, Boston, Washington DC, San Francisco, Los Angeles, etc.) Smaller markets continue to have trouble as they compete with these larger, hotter markets for jobs and talent. What has changed with the pandemic is the rise in remote working. It is too early to tell the extent of this change in market demand. However, it is now much more feasible to move to a lower-cost market but to continue to work for a firm based in a high-cost market…Remote working will dampen the demand for housing in the high job-growth markets which could reduce the price increases that would otherwise occur.”
Kirk McClure, Ph.D. – Professor Emeritus, University of Kansas

Will home prices finally become affordable this year?

“Maybe. Two bright spots in the overall US housing market could make housing more affordable soon. First, as the long end of the yield curve inverts, mortgage rates have already declined by a quarter percent from what they were two months ago and could decrease further. Second, the increase in single-family housing constructions (from 200-400K units/year after the subprime crisis to 600-800K units/year over the last two years) should work its way through the system and gradually resolve the housing supply shortage. Whether home prices will become more affordable this year will ultimately depend on the future direction of mortgage rates and housing supply, as well as the economic strength and local market conditions.”
Xiaoqing Eleanor Xu, Ph.D., CFA – Professor, Seton Hall University

“With this continuing high inflation and corresponding dramatic increases in mortgage interest rates we have seen over the past year, home prices will continue to drop until they stabilize to reflect these higher interest rates. This stabilization will take at least another year to manifest.”
Steven F. Brown, Ph.D., MBA, CPA, CFP® – Texas Real Estate Broker; Real Estate Faculty, Dallas College/Cedar Valley Campus