As if you needed confirmation, housing in Chicago is becoming officially “unaffordable,” according to a new report by the Fannie Mae Foundation. Housing prices are rising faster than income growth, or to put it another way: the median family income is no longer enough to afford a median-priced home in the area.
And things aren’t getting any better. The median home price in the Chicago area during 2003 was $238,900. Fannie Mae predicts that will rise 32 percent by 2008, while the 2003 median family income of $68,700 will rise only 16 percent during the same period.
The study assigns metropolitan areas a “homeownership affordability ratio” that measures the percentage of median family income needed to purchase a median-priced home. During most of the ’90s, Chicago’s ratio was close to 100, meaning the median income was just enough to purchase the median home. The ratio is now closer to 110 and is expected to rise to 120 after 2004, meaning families will need to earn 120 percent of the median income to purchase a home at the median price for the area.
Other cities shifting from affordable to unaffordable include Denver, Seattle and Washington, D.C. The most expensive housing markets – New York, Boston, L.A. and San Francisco – face even bleaker prospects. Affordability ratios are expected to pass 200 in these metropolitan areas during the next five years, which means buyers will have to earn double the area’s median income in order to afford the median-priced home.