25 most and least affordable cities for homebuyers

A lot has changed in the housing market during the past year. In 2014 prices went on a roller coaster ride, mortgage rates took another dip, and market watchers were still wondering when first time home buyers would come out of hiding.

Spring of 2015 saw such a jump in home prices in some markets that it raised the question of whether we were in another boom and bust cycle. Social media headlines that went viral included reports of multi-million dollar home sales prices in Silicon Valley and the San Francisco area. Housing inventory shortages were news in many markets. Millennials - tired of living with their parents or watching their rents go through the roof - began outpacing Gen-Xers as first time home buyers. Who would have guessed a year ago?

Despite the news about bidding wars, however, it's not a sellers' market everywhere. In fact, there are plenty of places you can find homes selling at or below market value, where you can still negotiate a fair price.

If you're a homebuyer and want to know if the housing market is affordable in your city, you have to look at more than the median price of the home. Take these factors into consideration:

• Mortgage rates. Still very low, mortgage rates have begun to climb just a bit, as expected; however, financing has become more readily available to qualified buyers, especially those who may not have as much as the traditional 20 percent down payment. You can buy a home with as little as 3 percent down, so even if you are a first time homebuyer, you may be able to jump into some more expensive markets instead of throwing money away on renting.
• Earning potential. The economy is bouncing back in many markets, but salaries may still be flat. You may have to relocate to a city where jobs with growth potential in your field are plentiful. For lenders to look favorably upon you as a homeowner, you generally need a monthly income equal to about three times your monthly housing expenses - your mortgage, homeowners insurance, property taxes, and homeowners' association dues, for starters.
• Cost of living. You may want a home in a city - or in a neighborhood within a particular city - that offers plenty of amenities like great shops, restaurants, a nightlife, and walkability, but you have to weigh what it costs to live there against your current and future potential income. You may need to relax your location criteria to find a home that's affordable for you.
• Home prices. In many markets, home buyers are finding too few homes available right now. Where demand exceeds supply, home values typically rise, but they may level off as new construction homes come on the market. Finding a home you can afford may take a little longer.

If you're ready and impatient to become a homeowner, here are some of the most and least affordable cities in which to buy a home as of the first quarter of 2015, according to rankings by the National Association of Realtors®; median home prices from NAHB/Wells Fargo; and average annual income in 2014 for all occupations, based on data from the Bureau of Labor Statistics.

Most affordable cities for homebuyers in 2015

Even with as little as a 5 percent downpayment, annual income needed to get a mortgage for a median-priced home in these cities would be well below the average annual income for all occupations.

1. Youngstown-Warren-Boardman, OH-PA; median home price, $64,300; mean income, $38,260
2. Cumberland, MD-WV; median home price, $71,600; mean income, $40,700
3. Rockford, IL; median home price, $78,600; mean income, $42,950
4. Decatur, IL; median home price, $82,200; mean income, $40,570
5. Toledo, OH; median home price, $83,800; mean income, $41,740
6. Akron, OH; median home price, $95,400; mean income, $44,800
7. Binghamton, NY; median home price, $96,200; mean income, $44,190
8. Fond du Lac, WI; median home price, $96,600; mean income, $40,470
9. Kankakee-Bradley, IL; median home price, $99,500; mean income, $41,470
10. South Bend-Mishawaka, IN; median home price, $102,100; mean income, $41,100
11. Peoria, IL; median home price, $105,200; mean income, $47,970
12. Davenport-Moline-Rock Island, IA-IL; median home price, $109,400; mean income, $42,110
13. Springfield, IL; median home price, $115,200; mean income, $49,760

Least affordable cities for homebuyers in 2015

Even with a 20 percent down payment, the annual income required to finance a median-priced home in these markets in far exceeds the average income of most households.

1. San Jose-Sunnyvale-Santa Clara, CA; median home price, $900,000; mean income, $75,770
2. San Francisco-Oakland-Fremont, CA; median home price, $748,300; mean income, $64,990
3. Honolulu, HI; median home price, $699,300; mean income, $47,850
4. Anaheim-Santa Ana-Irvine, CA; median home price, $685,700; mean income, $53,010
5. San Diego-Carlsbad-San Marcos, CA; median home price, $510,300; mean income, $53,020
6. New York-Wayne-White Plains, NY-NJ; median home price, $466,700; mean income, $61,640
7. Boulder, CO; median home price, $442,200; mean income, $56,510
8. Los Angeles-Long Beach-Santa Ana, CA; median home price, $434,700; mean income, $53,000
9. Naples-Marco Island, FL; median home price, $405,000; mean income, $41,480
10. Nassau-Suffolk Counties, NY; median home price, $404,200; mean income, $53,890
11. New York-Northern New Jersey-Long Island, NY-NJ-PA; median home price, $388,600; mean income, $59,060
12. Miami-Fort Lauderdale-Miami Beach, FL; median home price, $269,100; mean income, $44,000

Photo credit to Kevin Irby