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
Cities are defined as affordable if
affordability is greater than or equal to 0.
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