Soaring housing prices are outpacing wage growth in cities around the world, putting the squeeze on countless would-be homeowners.
According to a new analysis of the global housing market by Online Mortgage Advisor, a Britain-based service that matches brokers with home buyers, many cities were less affordable for local workers in 2021 than they were in 2017. And the 10 cities that experienced the biggest drop in affordability were all in the United States, with Cleveland leading the pack.
As part of its research, the firm looked at 218 cities around the world and compared the average price of one square foot of an apartment in each city center to the average annual salary of local workers. In Cleveland last year, the average worker could afford to buy 289.7 square feet of space — a nosedive from the 496.3 square feet the average worker could afford in 2017.
“The U.S. is seeing a tendency to become much less affordable due to soaring property prices, while salary growth is remaining relatively flat,” Pete Mugleston, managing director of Online Mortgage Advisor, said in an email. He noted that in Cleveland, for example, the average price of a square foot of real estate jumped 134 percent in five years, while the average salary rose only 37 percent.
Next on the list was Oklahoma City, which experienced a decline of 182.1 square feet, followed by Jacksonville, Fla., down 130.2 square feet; Boise, Idaho, down 125.8 square feet; and Las Vegas, down 96.8 square feet.
The list included five other midsize cities — Sacramento; Reno, Nev.; Louisville, Ky.; Tampa, Fla.; and Raleigh, N.C. — but no large cities.
Americans are less likely to want to live in a city now than before the pandemic, according to a December 2021 report by the Pew Research Center. The increased demand in smaller cities has pushed up prices in some of those areas faster than wages have been able to respond.
In fact, Mr. Mugleston said, the gap between average earnings and real estate prices in large American cities has fallen only slightly since 2017. “It was surprising to see how some of the larger, notoriously unaffordable cities, such as San Francisco and Los Angeles, have become more affordable over the past five years,” he said.