Most affordable housing markets
Midwest cities lead the nation in housing affordability, according to an index by the National Association of Home Builders and Wells Fargo.
NEW YORK (CNNMoney.com) -- When it comes to affordable housing, no region can top the Midwest: Nine of the top ten of the nation's most affordable housing markets are there, according to the latest National Association of Home Builders/Wells Fargo Housing Opportunity Index.
The report said that affordability suffered just a little during the second quarter of 2006, as housing prices stayed about the same but mortgage rates ticked up.
Indianapolis has retained its status as the most affordable large city in the United States for home buyers and Springfield, Ohio was No. 1 when smaller cities were included in the rankings.
About 40 percent of homes in the United States were deemed affordable to families earning the national median income of $59,600. That was down from 41.3 percent in the first quarter.
The index tries to capture a snapshot of affordability by calculating housing expenses and comparing them to income. Housing expenses include property taxes and insurance as well as the mortgage payment. The formula calls for all that to be no more than 28 percent of income.
The final index number is the percentage of homes sold during the quarter that families earning the median income could afford to buy.
In Indianapolis, 87.4 percent of all the homes sold there during the second quarter were affordable to anyone earning metro area's median household income, $65,100. The median price for a home was $120,000.
Contrast that with the Los Angeles /Long Beach/Glendale housing market, the nation's least affordable, where just 2 percent of all the homes sold during the quarter were affordable for those earning the median family income of $56,200. The median home in Los Angeles costs $521,000.
Other major metro areas suffering severe affordability problems were Santa Ana/Anaheim and San Diego, in California, and the New York metro area.
Smaller unaffordable metro areas include Salinas, Merced and Modesto, all Golden State cities.
The most affordable markets were located mostly in the Midwest. Detroit/Livonia/Dearborn, Michigan; Grand Rapids/Wyoming, Michigan and Buffalo/Niagara Falls, New York led the way.