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If you guessed Detroit is the cheapest large city in America, then you’re correct. But you may not have considered Philadelphia to be affordable too.
You only need to earn $40,000 a year to afford a 5 percent down payment on a home in Philadelphia, Pennsylvania, according to Unison Home Ownership Investors.
The top 5 cheapest large cities (except Philadelphia)
Based on annual income needed to put a 5 percent down payment on a home
Five most expensive cities
It’s of interest for homebuyers to know where homes are most affordable in the U.S. given the current state of the housing market.
Housing prices in the U.S. are steadily increasing, while inventory of homes is decreasing. Housing inventory is down 20 percent from last year, according to a study from real estate company Redfin. And home prices have increased over the past decade, according to Unison.
“The topic of housing affordability has become a nationwide conversation, and with good reason,” Unison’s study says. “Many would-be homebuyers believe that the dream of homeownership is slipping out of their reach.”
Some major factors are due to potential homebuyers’ younger age, and they’re difficulty to find starter homes. Aside from low inventory, many of these home shoppers are in heavy student loan debt. Forty-one percent of home shoppers said they have student loan debt, according to the National Association of Realtors (NAR).
“The dreams of many aspiring first-time buyers were unfortunately dimmed over the past year by persistent inventory shortages, which undercut their ability to become homeowners,” says Lawrence Yun, NAR chief economist. “With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home.”
Debt.com has previously reported that home value has been increasing over the past five years. The equity on starter homes has increased by 44 percent, according to a study from Zillow. Most of those homeowners show no sign of selling. The rate of entry-level homes is down 18 percent.
Last year Debt.com reported that renters weren’t buying, because they couldn’t afford a down payment on a home. Renters were struggling to save up enough to put down, according to a study from Zillow.
“With home values close to record highs, it’s no surprise renters are concerned about coming up with enough money to buy a home,” says Zillow chief economist Svenja Gudell. “Rising rents are also a factor. It’s extremely difficult to save when you’re paying record-high rents.”
Now, young renters are stuck in a tight spot. Rent is far too expensive to maintain, but affording rising home costs and interests rates is becoming an increasingly difficult feat for many home shoppers. Almost a quarter (23 percent) of millennials say high rents are forcing them into homeownership says a study from real estate company Redfin.
That’s not to mention the amount of debt young homebuyers are already facing. Making shopping for an affordable home that much more imperative — if they can find one.
“Existing debt and lower down payments leave younger shoppers more exposed than others to the impact of rising mortgage rates and record-high home prices,” says Danielle Hale, chief economist for realtor.com. “These obstacles won’t prevent millennials from finding and buying homes, but most will have to adapt to these challenging market conditions by adjusting their home search.”
Published by Debt.com, LLC Mobile users may also access the AMP Version: The Biggest Cities With The Cheapest Homes - AMP.