Methods
The purpose of this product is to:
Create a back-of-the-envelope calculation to determine which cities
the “average” household could afford to buy the “average” home, inspired
by this
article in the New York Times.
Sources
- City-level median household income: Median
household income in the past 12 months are from the US Census, American
Community Survey (ACS) 5-year estimates, 2016-2020.
- City-level median property value: Median
owner-occupied property value are from the US Census, American Community
Survey (ACS) 5-year estimates, 2016-2020.
- City-level population: Total population is from the
Decennial US Census, 2020.
Methodology
We calculated the following variables for the analysis:
- affordable_home_price = 2.5 * median household
income
- affordability = median owner-occupied property
value - affordable_home_price
This analysis is designed for easy calculation to determine if
further research is warranted. To estimate which cities with population
over 50,000 are affordable we use:
- The general rule of thumb that a household can afford to purchase a
property that is 2.5 times their income source (investopedia)
- Median household income as a proxy for the
“average” household
- Median owner-occupied property value as a proxy for
the “average” home
Cities are defined as affordable if
affordability is greater than or equal to 0.