From Miami to Boston, housing affordability remains a challenge but conditions are improving, according to a new TD Economics report.
Key Points
- Housing affordability has improved slightly since 2023 but remains well below pre-pandemic norms across a dozen large East Coast markets.
- Fast-growing Southern cities such as Charlotte, Orlando, Miami and Atlanta have had the sharpest declines in affordability since the end of 2019.
- Miami has the highest mortgage burden on the East Coast, with housing costs consuming an estimated 39% of household income.
- Meaningful affordability gains will likely depend on higher incomes and that rapid price hikes recorded during the pandemic remain in the rearview mirror.
Housing affordability remains a key barrier for those looking to make the leap into homeownership. While conditions have improved modestly since reaching a multi-decade low in 2023, recovery has been slow, according to a new report from TD Economics that looks at how East Coast markets compare.
The study is based on a typical housing affordability index, which measures how affordable a market is based on home prices, 30-year mortgage rates and household income. Higher values indicate better affordability.
How does housing affordability rank on the East Coast?
To better understand the purchasing power of homebuyers today and the impact of the pandemic on the housing market, the report written by Admir Kolaj, TD Economist, examines the affordability readings from 2000–2019 with 2020–2026 in 12 major East Coast cities from Boston to Miami.
The data is clear: Cost of living has changed significantly since 2020, and housing is no exception. Major Southern cities Charlotte and Orlando are 40% less affordable than pre-COVID years (2000-2019), while Miami and Atlanta had a 39% drop. Of the areas studied, Baltimore has generally fared better, although this market too has experienced a 25% drop in affordability compared with its pre-pandemic norm.
The report also shows that historically expensive areas such as New York and Boston face ongoing affordability challenges, although the drop in their affordability readings have been slightly less than in the Southeast.
Southeast housing affordability losing its shine
New residents came by the hundreds per day in the pandemic years to many Southeast metros. The rapid population increase meant larger competition for houses that drove higher price tags. Meanwhile, salaries haven't quite kept up, so more households are spending a greater portion of their income on housing.
In Florida, residents of Miami, Orlando and Tampa are spending significantly more on housing. Miami has the highest mortgage burden (the percent of income a typical mortgage would consume) not only in the state, but on the East Coast, at 39%. The real burden is likely higher because this calculation doesn't account for other ownership costs such as higher homeowners insurance, which tends to come with elevated rates in the hurricane-prone state.
The median price of a single-family home in the Miami metro area is up an astonishing 70% from the end of 2019, compared with a nationwide average of 48%. Single-family home prices have stayed elevated in part because new development has been limited, with construction skewed toward new rental multifamily housing.
Central Florida is attractive to families, but Orlando and Tampa prices climbed along with their populations.
Orlando's latest index reading is 40% below the 2000–2019 average, while Tampa is 36% below its norm. These areas had steep pandemic-era home-price shocks that tapered slightly recently thanks in part to rich construction pipelines. Local salaries, meanwhile, trended higher and firmly outpaced price increases in the last two to three years. These positives mean affordability has somewhat improved across the I-4 corridor.
While the cost of living in Charlotte and Atlanta is lower than in the Northeast and in Miami, both Southern metros have lost some of their affordability appeal.
For many families in Charlotte, homeownership has become harder to reach. Housing affordability is now 40% below its two-decade, pre-pandemic norm. Atlanta isn't far behind with a 39% decrease.
The good news is that home price growth has slowed in both areas over the last couple of years, especially in Atlanta, with heavy new-home construction partly behind this trend. Incomes have continued to grow at an average pace in both markets as new companies move to the areas.
Still expensive in the Northeast
The New York and Boston metros are generally known for costly real estate, and the pandemic years were no exception.
The median single-family home price in metro New York climbed an eye-popping 82% since 2019 while income growth was much more modest. The current mortgage burden for New Yorkers is 36% of income, making it second highest on the Atlantic coast. In New England, Bostonian's current mortgage burden is still elevated at 30%.
New construction is often difficult in these areas due to zoning restrictions, land availability and costs, meaning the Northeast hasn't had enough supply increase to relieve some affordability pressure like in some areas farther south.
How housing affordability ranks in the Mid-Atlantic
Philadelphia’s housing affordability challenges are deeper than its most recent mortgage burden calculation suggests. While mortgage payments would take up about 20% of median family income, housing affordability is still 42% below its 2019 level as home price climbs have outpaced income growth. This puts the decrease in Philly's affordability index on par with Boston and New York.
By contrast, Baltimore and the Washington, D.C., metro areas have generally weathered affordability pressures better than most East Coast markets. Although affordability in these metros is below pre-pandemic levels, incomes have generally matched home prices, which grew at a below-average pace and kept homeownership more within reach.
Will housing affordability improve?
While affordability has begun to recover in East Coast markets in recent years, most homebuyers are still spending a larger share of their income on housing than they did before the pandemic. Meaningful improvement will likely depend on continued income growth.
"There is room for mortgage rates to head somewhat lower from current elevated levels, but a return to the unusually low mortgage-rate environment seen during the pandemic remains unlikely," Admir said. "That will leave income growth, and its ability to outpace price growth, to do the heavy lifting when it comes to affordability repair."
The bottom line? Improvement will likely continue to be gradual, he said.
