The National Association of Home Builders (NAHB) recently published its list of the most affordable housing markets in the US for the second quarter of 2022.
When housing affordability seems to be taking steps away from the average Joe’s reach, the NAHB gives us a list of markets where housing is still affordable. Given the continuous spike in mortgage rates and housing prices in the US―add inflation to the mix―many people are taking notice of such cheap locations.
According to the NAHB/Wells-Fargo Housing Opportunity Index (HOI), only 42.8% of new and existing homes sold between April and June were within reach of families with a median income of $90,000. Compared to the 56.9% of homes sold in Q1 2022 that were affordable for median-income families, the latest quarterly figures represent a huge drop.
The average family in the US spent 24.3% of their income on mortgage payments in Q2 2022, up from 18.7% from the previous quarter and 16.9% a year prior. A mortgage rate is already considered unaffordable if families make payments of 25% of their income.
NAHB chairman Jerry Konter said, “Rising housing costs stemming from increased interest rates, supply chain disruptions that have led to higher prices for building materials, and a persistent lack of construction workers are dramatically affecting home prices.”
“Taming housing costs will ultimately require building more homes, and it will be easier to increase production in more affordable smaller and mid-sized markets that are growing in population and attracting new businesses,” added Konter.
The bottom line is that home prices in the US housing market have gone beyond what’s affordable for almost half of the families in the country.
Related: When Will Mortgage Rates Go Down in 2022?
Top 13 Affordable Housing Markets in the US
In its HOI report, the NAHB discovered that the Lansing-East Lansing, MI market is the most affordable major market in the country today. About 85% of homes are within reach for the state’s families with a median income of $89,500.
Based on the same report, we’ve listed the top markets with the most affordable housing in the US. The list is ranked based on the lowest median property price on an investment property down to the highest, according to Mashvisor’s latest data.
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Top Major Housing Markets in the US With the Most Affordable Housing
The NAHB/Wells-Fargo HOI listed ten metro areas with the most affordable housing in the US. We’ve broken down each metro into separate locations to give you a better idea of what each area can offer for real estate investing.
1. Wilkes-Barre, PA
- Median Property Price: $163,113
- Average Price per Square Foot: $101
- Days on Market: 95
- Number of Traditional Listings: 8
- Monthly Traditional Rental Income: $760
- Traditional Cash on Cash Return: 1.60%
- Traditional Cap Rate: 1.68%
- Price to Rent Ratio: 18 (medium)
- Monthly Airbnb Rental Income: $2,345
- Airbnb Cash on Cash Return: 9.19%
- Airbnb Cap Rate: 9.70%
- Airbnb Daily Rate: $123
- Airbnb Occupancy Rate: 64%
- Walk Score: 88
2. Scranton, PA
- Median Property Price: $200,382
- Average Price per Square Foot: $93
- Days on Market: 75
- Number of Traditional Listings: 111
- Monthly Traditional Rental Income: $1,280
- Traditional Cash on Cash Return: 4.20%
- Traditional Cap Rate: 4.43%
- Price to Rent Ratio: 13 (low)
- Monthly Airbnb Rental Income: $2,683
- Airbnb Cash on Cash Return: 9.10%
- Airbnb Cap Rate: 9.53%
- Airbnb Daily Rate: $107
- Airbnb Occupancy Rate: 66%
- Walk Score: 24
3. Lansing, MI
- Median Property Price: $202,181
- Average Price per Square Foot: $98
- Days on Market: 51
- Number of Traditional Listings: 3
- Monthly Traditional Rental Income: $849
- Traditional Cash on Cash Return: 1.85%
- Traditional Cap Rate: 1.98%
- Price to Rent Ratio: 20 (high)
- Monthly Airbnb Rental Income: $2,649
- Airbnb Cash on Cash Return: 7.25%
- Airbnb Cap Rate: 7.58%
- Airbnb Daily Rate: $115
- Airbnb Occupancy Rate: 63%
- Walk Score: 62
4. Anderson, IN
- Median Property Price: $229,129
- Average Price per Square Foot: $115
- Days on Market: 40
- Number of Traditional Listings: 56
- Monthly Traditional Rental Income: $743
- Traditional Cash on Cash Return: 1.59%
- Traditional Cap Rate: 1.66%
- Price to Rent Ratio: 26 (high)
- Monthly Airbnb Rental Income: $2,557
- Airbnb Cash on Cash Return: 7.64%
- Airbnb Cap Rate: 7.96%
- Airbnb Daily Rate: $115
- Airbnb Occupancy Rate: 67%
- Walk Score: 57
5. East Lansing, MI
- Median Property Price: $257,238
- Average Price per Square Foot: $128
- Days on Market: 33
- Number of Traditional Listings: 1
- Monthly Traditional Rental Income: $1,190
- Traditional Cash on Cash Return: 2.03%
- Traditional Cap Rate: 2.12%
- Price to Rent Ratio: 18 (medium)
- Monthly Airbnb Rental Income: $2,244
- Airbnb Cash on Cash Return: 4.54%
- Airbnb Cap Rate: 4.75%
- Airbnb Daily Rate: $148
- Airbnb Occupancy Rate: 65%
- Walk Score: 39
6. Harrisburg, PA
- Median Property Price: $307,347
- Average Price per Square Foot: $154
- Days on Market: 47
- Number of Traditional Listings: 49
- Monthly Traditional Rental Income: $1,279
- Traditional Cash on Cash Return: 2.50%
- Traditional Cap Rate: 2.61%
- Price to Rent Ratio: 20 (high)
- Monthly Airbnb Rental Income: $3,136
- Airbnb Cash on Cash Return: 6.81%
- Airbnb Cap Rate: 7.04%
- Airbnb Daily Rate: $120
- Airbnb Occupancy Rate: 65%
- Walk Score: 52
7. Indianapolis, IN
- Median Property Price: $360,304
- Average Price per Square Foot: $173
- Days on Market: 68
- Number of Traditional Listings: 963
- Monthly Traditional Rental Income: $1,039
- Traditional Cash on Cash Return: 1.88%
- Traditional Cap Rate: 1.97%
- Price to Rent Ratio: 29 (high)
- Monthly Airbnb Rental Income: $2,292
- Airbnb Cash on Cash Return: 4.19%
- Airbnb Cap Rate: 4.37%
- Airbnb Daily Rate: $172
- Airbnb Occupancy Rate: 46%
- Walk Score: 32
8. Carlisle, PA
- Median Property Price: $420,706
- Average Price per Square Foot: $186
- Days on Market: 65
- Number of Traditional Listings: 31
- Monthly Traditional Rental Income: $1,651
- Traditional Cash on Cash Return: 1.89%
- Traditional Cap Rate: 1.94%
- Price to Rent Ratio: 21 (high)
- Monthly Airbnb Rental Income: $2,628
- Airbnb Cash on Cash Return: 4.60%
- Airbnb Cap Rate: 4.76%
- Airbnb Daily Rate: $151
- Airbnb Occupancy Rate: 65%
- Walk Score: 70
9. Carmel, IN
- Median Property Price: $506,336
- Average Price per Square Foot: $197
- Days on Market: 55
- Number of Traditional Listings: 102
- Monthly Traditional Rental Income: $2,260
- Traditional Cash on Cash Return: 3.09%
- Traditional Cap Rate: 3.14%
- Price to Rent Ratio: 19 (medium)
- Monthly Airbnb Rental Income: $4,917
- Airbnb Cash on Cash Return: 6.81%
- Airbnb Cap Rate: 6.93%
- Airbnb Daily Rate: $287
- Airbnb Occupancy Rate: 65%
- Walk Score: 49
Related: How to Choose a Real Estate Market to Invest in
Top Smaller Housing Markets in the US With the Most Affordable Housing
The HOI also gave us a list of four affordable smaller housing markets in the US, based on median property price. They are:
1. Moline, IL
- Median Property Price: $179,780
- Average Price per Square Foot: $106
- Days on Market: 41
- Number of Traditional Listings: 79
- Monthly Traditional Rental Income: $1,053
- Traditional Cash on Cash Return: 2.74%
- Traditional Cap Rate: 2.90%
- Price to Rent Ratio: 14 (low)
- Monthly Airbnb Rental Income: $1,869
- Airbnb Cash on Cash Return: 5.85%
- Airbnb Cap Rate: 6.22%
- Airbnb Daily Rate: $117
- Airbnb Occupancy Rate: 68%
- Walk Score: 45
2. Wheeling, WV
- Median Property Price: $210,777
- Average Price per Square Foot: $124
- Days on Market: 26
- Number of Traditional Listings: 8
- Monthly Traditional Rental Income: $1,192
- Traditional Cash on Cash Return: 4.95%
- Traditional Cap Rate: 5.25%
- Price to Rent Ratio: 15 (medium)
- Monthly Airbnb Rental Income: $930
- Airbnb Cash on Cash Return: 3.48%
- Airbnb Cap Rate: 3.80%
- Airbnb Daily Rate: $57
- Airbnb Occupancy Rate: 58%
- Walk Score: 1
3. Cumberland, MD
- Median Property Price: $230,838
- Average Price per Square Foot: $128
- Days on Market: 69
- Number of Traditional Listings: 50
- Monthly Traditional Rental Income: $1,052
- Traditional Cash on Cash Return: 3.15%
- Traditional Cap Rate: 3.30%
- Price to Rent Ratio: 18 (medium)
- Monthly Airbnb Rental Income: $2,084
- Airbnb Cash on Cash Return: 7.05%
- Airbnb Cap Rate: 7.41%
- Airbnb Daily Rate: $124
- Airbnb Occupancy Rate: 57%
- Walk Score: 25
4. Davenport, IA
- Median Property Price: $299,294
- Average Price per Square Foot: $185
- Days on Market: 124
- Number of Traditional Listings: 28
- Monthly Traditional Rental Income: $973
- Traditional Cash on Cash Return: 1.21%
- Traditional Cap Rate: 1.28%
- Price to Rent Ratio: 26 (high)
- Monthly Airbnb Rental Income: $2,139
- Airbnb Cash on Cash Return: 3.09%
- Airbnb Cap Rate: 3.22%
- Airbnb Daily Rate: $98
- Airbnb Occupancy Rate: 64%
- Walk Score: 77
Related: How to Find Good Investment Properties
Do Affordable Housing Markets Make Great Rental Markets?
This may be one of the questions in your mind right now. Seeing the numbers for some of the most affordable markets in the US, you can’t help but think about whether you should invest in them.
Except for Carmel, IN, they all show median prices of below $500,000. Plus, many of them provide above 2.00% cash on cash return and cap rates for both traditional and Airbnb rentals. If you choose to start an Airbnb business in the said locations, you will get above 50% Airbnb occupancy rate, except for Indianapolis’s 46%.
If you plan to start a rental property business, you might get a good return on investment from the above housing markets. For instance, according to Mashvisor’s latest data, the market with the lowest median property price is Cahokia in St. Clair, IL. It boasts a median price of only $69,036 at $57 per square foot.
Traditional rental properties in the area earn a monthly rental income of $697 on 5.45% cash on cash return. A Cahokia Airbnb property will give you around $871 on 3.63% cash on cash return with a slightly-below average occupancy rate of 46%.
The above numbers aren’t bad at all, considering the amount you need to make an investment. However, not all markets that offer affordable housing are as profitable. It will still depend on the condition of the market and how healthy its economy is. It will also depend on your investment strategy. Rental properties will do you good, but house flipping and the BRRR strategy may be a different story.
So before deciding, make sure you do your homework first and go over the numbers repeatedly.
Before investing in rental properties, make sure to conduct due diligence on the (affordable) housing market of your choice.
Wrapping It Up
The most affordable housing markets in the US can be considered good investment locations if you were to start a rental business. It’s a different story if you go with a different strategy. It is why you should do your due diligence first before making any decisions.
The good news is that Mashvisor can make real estate analysis more efficient and quicker with its massive database and investment tools.
To start using Mashvisor now, click here to sign up for a 7-day free trial today, followed by 15% off for life.
