Scoring Affordability in Key US Metros

Our team put together an interesting chart to contextualize apartment affordability in markets we track. We measured rent-to-income ratios and then calculated how many standard deviations above or below these markets were from the yearly average of observed markets from 2014-2022.

Where:

• 1 = 1 standard deviation above average (more affordable)
• 0 = average
• -1 = 1 standard deviation below average (less affordable)

The scores only reflect just the subset of markets listed in the chart, NOT the average of all markets in the US.

Example: Atlanta in 2022 is 0.45 standard deviations more affordable than cities listed in the chart (subset), not 0.45 standard deviations more affordable than the average of all markets in the US.

Also, to get 2022 incomes, we took 2021 income x 3 yearly average growth rate since the incomes aren't out yet.?

Key Takeaways

I was surprised to see that Austin, Denver, and Seattle have become?MORE?affordable over time. Initially, I would have thought the opposite.

Charlotte and Dallas have been steady eddy with virtually no change.

Las Vegas, Phoenix, and Tampa have become?significantly more expensive?than just a few years ago.

Phoenix went from being the most affordable of this subset to being about average.

Pretty big swing for Chicago, going from relatively unaffordable to more affordable than average.

Renting in Los Angeles or San Francisco will still cost you an arm and a leg. No surprise there, but it's expensive even relative to the higher incomes. It's clear that LA needs more housing now more than ever.

Minneapolis had a massive increase in affordability, but it saw many folks move to the suburbs in 2020 and 2021 to avoid the unrest.

I expect that to revert closer to the affordability levels it maintained in previous years as people return to the city.

Investors who are operating in these markets day to day, are you seeing the same thing in the markets you cover?

Curious about your thoughts on this chart, please share them in the comments section below!