Key Takeaways
- Five U.S. Cities Among the World’s Top 10 Most Unaffordable: San Jose, Los Angeles, Honolulu, San Francisco, and San Diego dominate the list, highlighting a severe housing crisis.
- Hong Kong Tops the List: With a staggering median multiple of 16.7, Hong Kong remains the least affordable city globally.
- Urgent Need for Policy Changes: Addressing land costs and increasing housing supply are crucial to tackling the global housing affordability crisis.
Five U.S. Cities Ranked Among World’s Most Unaffordable Homes in 2024
In a bombshell revelation, the 2024 Demographia International Housing Affordability report has exposed a staggering truth: five U.S. cities now rank among the world’s top ten most unaffordable places to buy a home.
This seismic shift in the housing market has profound implications for real estate investors, signaling a dramatic and potentially destabilizing trend.
These cities have crossed into the “impossibly unaffordable” zone, where housing costs have spiraled beyond the reach of average incomes.
U.S. Real Estate Investors: A Market in Crisis
The overrepresentation of U.S. cities in this list is a stark warning for real estate investors. San Jose, Los Angeles, Honolulu, San Francisco, and San Diego highlight an escalating crisis in the American housing market.
Pittsburgh, PA, with a median multiple of 3.1, remains a rare beacon of affordability in the U.S., offering a glimmer of hope amidst a growing affordability desert.
Underlying Factors: Why Are Homes So Expensive?
The report identifies several key drivers of this unaffordability crisis:
- Restrictive Land Use Policies: Policies that limit housing supply are inflating land prices and making homeownership unattainable for many.
- Pandemic-Driven Demand: The COVID-19 pandemic has sparked a demand surge for homes with more space, pushing prices skyward.
- Investor Activity: Increased investor activity in housing markets has driven prices even higher, creating a fiercely competitive environment.
Global Pandemic of Unaffordability
The report underscores a disturbing global trend: housing affordability is deteriorating across many high-income nations.
Urban containment policies, such as greenbelts and urban growth boundaries, are major contributors, restricting land supply and driving up costs.
Startling Statistics
The median multiple affordability categories are:
- Affordable: 3.0 & under
- Moderately Unaffordable: 3.1 to 4.0
- Seriously Unaffordable: 4.1 to 5.0
- Severely Unaffordable: 5.1 to 8.9
- Impossibly Unaffordable: 9.0 & over
In 2023, the U.S. had a median multiple of 4.8, up from 3.9 in 2019. This rapid rise in housing costs relative to incomes is a critical concern for investors.
Learning from New Zealand: A Model for Reform
The report highlights New Zealand’s proactive reforms as a model for addressing the crisis.
Recognizing that high land costs are at the heart of the problem, New Zealand has implemented policies to ensure abundant developable land, contrasting sharply with strategies focused solely on densification.
Call to Action for Real Estate Investors
The 2024 Demographia International Housing Affordability report is a wake-up call. With housing costs far outpacing income growth, the dream of homeownership is slipping away for many, presenting both a challenge and an opportunity for real estate investors.
Policymakers and investors must address the root causes of this crisis to restore balance and sustainability to the housing market.
Assessment
The 2024 housing affordability crisis is a clear indication that immediate action is needed. Urban containment policies and pandemic-driven demand have significantly contributed to the current state.
By following the example of New Zealand and addressing land costs, there is hope to turn the tide and make homeownership attainable once again.
