“Decreasing affordability in the housing market means more Ohioans that would previously have become homeowners are now vying for rental units,” said Marcus Roth, communications and development director with the Coalition on Homelessness and Housing in Ohio. “This means housing is getting more out of reach for lower-income Ohioans.”
At the same time, even with rising prices, Realtor.com says Ohio has been the most affordable state in the nation when it comes to housing in the first half of 2023.
“This means that Ohio is a market where the homes for sale are more affordable to households across low, medium and high incomes (than other U.S. markets),” said Hannah Jones, an economic data analyst with Realtor.com.
What does the data say?
Last year, the median home price in the Dayton metro area was 3.5 times greater than the median household income, per data from the Harvard Joint Center for Housing Studies. The group said that ratio ranged from 2 to 2.7 between 1990 and 2019, creeping up slowly last decade before soaring since the start of the COVID pandemic.
For example, a 3.5 home price-to-income ratio would match a $50,000 income to a $175,000 home, or a $100,000 income to a $350,000 home.
The Joint Center for Housing Studies says its analysis is based on data from Moody’s Analytics, which is considered proprietary. But the center publishes the findings of its analysis.
The median home price in the Dayton metro area was about $189,000 in spring of 2022, according to data from Zillow and the Joint Center for Housing Studies. But Zillow said the median list price of homes for sale in the Dayton region in June 2023 was much higher at $217,670.
The median home price for the entire Buckeye State in both 2021 and 2022 was $174,000, remaining at the highest level in more than two decades, according to data from CoreLogic. And the median home in Ohio cost about 2.8 times more than the state’s median household income in 2021 ($62,260), according to Census and CoreLogic data.
Still, that’s cheap compared to much of the nation. The median home price in the U.S. was about $310,000 in 2022 and 2021, or about 4.4 times more than the median income ($70,780), CoreLogic and Census data show. Specifically for existing single-family homes, the Harvard Joint Center put the U.S. ratio even higher for 2022, at 5.5 times the U.S. median household income.
Huge jump in prices since 2020
Nationally, home price-to-income ratios have hit record highs since the start of the COVID pandemic, said Alex Hermann, a research associate at the Harvard Joint Center and one of the authors of the State of the Nation’s Housing report.
“Prices, if you look historically, typically have not been so disassociated from incomes,” he said. “The unprecedented rise in price-to-income ratios is largely, if not entirely, driven by the incredible rise in home prices we’ve seen during the pandemic.”
There’s no universally agreed-upon rule about how much people should spend buying a home.
The Brookings Institution said historically, before COVID, median home prices were roughly 2.5 to 4 times greater than median annual incomes. Other groups have said housing is affordable if it costs about 2.6 years of household income.
Fidelity has recommended that homebuyers spend no more than three to five times their annual household income to buy a home, depending on their level of debt and other financial considerations.
Housing affordability has deteriorated because of high and rising home prices and rising interest rates, Hermann said. He also pointed out that price-to-income ratios don’t factor in interest rates and the amount of savings needed for down payments. Mortgage interest rates have been around 7% this summer after years in the 3-4% range.
A local family’s example
Tara and Ken Folino and their two children moved from Oakwood earlier this year after purchasing a home in Brookville. They were able to buy that home in April at 1.5 times more than their household income, but it’s a stopgap.
“It’s definitely a lot less affordable than it was the last time I bought a house,” Tara Folino said. “We bought (our previous) house 9 1/2 years ago and ... it was way more affordable, way less of a competitive market. I feel like it’s just harder for people these days.”
To secure the purchase of their home earlier this year, they had to pay 3.5% more than the asking price.
The Folinos are getting ready to build a totally new home in Brookville, but it will cost about 30% more than they originally planned due to inflation and supply-chain issues caused by the COVID-19 pandemic, putting that home at more than five times their household income.
“That project is going to start soon,” she said. “This is just a temporary stop for us.”
Affordable, at least by comparison
The Dayton-Kettering metropolitan statistical area ranked 26th out of 234 metro areas nationwide with a 78.4% share of housing being affordable for the median income, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index for first quarter 2023.
When it comes to regions with populations of 500,000 or more in 2022, the Dayton-Kettering area ranked as the ninth most affordable metro area in the U.S. by that metric.
The Springfield metro area ranked 5th with an 87.2% share of housing listed as affordable for median income. And for areas with populations under 500,000 in 2022, the Springfield area ranked fourth most affordable in the nation.
Supply shortages are one of the main reasons there’s been such strong price growth in housing, researchers say.
And the Dayton region in particular this year has ranked as one of the worst urban areas in the nation for housing availability. Realtor.com said the supply of homes for sale declined 20% between May 2022 and May 2023.
Relationship between housing, income
Several factors have contributed to the disparity between median salaries and median price of homes, but the first and biggest one is monetary policy, said Kevin Willardsen, an associate economics professor at Wright State University.
Part of that includes M2, or money supply, which is the amount of money and other liquid assets in an economy. It includes all the cash in circulation and all the money in people’s bank accounts that they can access.
“Right around 2020, 2021, there was explosive growth in M2,” Willardsen said. “What ends up happening is when you increase the money supply, all prices are going to rise. Increasing the money supply is what has caused the inflation.”
M2 starting to bend back down recently is a sign of deflation, he said.
The drastic gap between median income and median home price also was likely influenced by the numerous people 55 and older who retired early due to the pandemic, Willardsen said.
“There’s a big chunk of people (that) when they left the labor force ... were relatively high earners, so when they leave, that’s going to pull down the median,” he said.
