New research by Online Mortgage Advisor into real estate affordability found that real estate prices have outgrown local wages the most in the world in the past five years.
The researchers compared the difference in square feet – one square meter is roughly 10.7639 square feet – of the property a person earning the average annual net salary in each city could afford in 2020 compared to 2016. The researchers also compared what percentage of a person’s salary is spent on rent between these two periods.
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Using the latest real estate market insights in January 2021, the study also showed the percentage of homes in each state and city a local person can afford.
Main results:
• The average person in Tucson can afford 12.61 square feet less space in 2020 compared to 2016. That is about 135 square meters less space.
• Tucson, Arizona is the 8th city in the US with the worst change in rent affordability.
• Another city in Arizona also appears in the top 10 on the global list. Phoenix saw a 9.45 square feet difference – just over 100 square feet.
• Only 67% of Arizona real estate is affordable for couples with the average gross annual salary in the state. That number drops to 29% for singles.
In which world cities have real estate prices outgrown wages the most?
The researchers looked at where in the world house prices have become less affordable for local residents, on average annual salaries, based on the number of square feet of property they can buy.
Tucson, Arizona is where the world’s affordability changed worst. In 2020, full-time employees in Tucson could typically afford 22.92 square feet of space. That number has dropped dramatically to 10.32, which is a difference of 12.61 square feet.
In which US cities have rents increased the most?
We calculated the changing affordability of rentals in the US for those earning the local median salary.
Tucson, Arizona is the 8th city in the US with the worst change in rent affordability. Renting a property in 2016 was 27% of a local’s monthly salary, but increased to 31% in 2020.
What percentage of real estate can the average person currently afford in Arizona?
The researchers analyzed each property that is available for sale in the 50 most populous cities per US state using Trulia’s listings in January 2021 to see what percentage of that property a person can afford based on that they have that average gross annual salary in their state.
To do this, the researchers used the following formula:
Mortgage (4x salary) + 20% deposit = maximum real estate price affordable
• A single Arizonan can only afford 2.5% of the real estate on the market in Gilbert.
• Scottsdale is now the least affordable town in Arizona where locals can buy real estate in the current climate.
• Rio Rico is currently the cheapest city in Arizona to buy real estate for singles, while Sierra Vista is the cheapest for couples.
• 67% of Arizona real estate is affordable for the average couple. this number drops to 29% for singles.
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