Former Rust Belt cities such as Detroit, Cleveland and St. Louis topping the list of the most undervalued markets in which to buy a home, in more recent years many of them have started to revitalize their economies with new ideas, companies and investments. For the Detroit MSA, the median payment-to-income ratio of 17.4% is less than half that of the 36.6% ratio for the overall U.S., which is continuing to boost interest from homeowners and investors currently living in other states and even other countries.
For renters, while Detroit is in the top 20 most undervalued markets, this ranking is led by the greater Omaha, Nebraska, area with a rent-to-income ratio of 22.3%, which is 38% less than the 35.8% ratio for the U.S.
While St. Louis and Cleveland also join Detroit in being low-cost markets for renters, due to high incomes other markets such as San Jose, California, and Richmond, Virginia, are able to offer tenants a median rent-to-income ratio that is significantly lower than the national average. While that 30% rule may not apply to households with higher incomes and lower debt in areas such as Atlanta or Dallas, it’s still a useful formula to rank the country’s most undervalued housing markets.
The top 20 most undervalued housing markets include not just Midwest regions, but also cities near the East Coast and in Southern states such as Texas, Georgia and Florida. Still, while each of these markets report mortgage payment-to-income ratios under the national median of 36.6%, if that ratio gradually falls back to its pre-pandemic level of 22%, home prices in multiple markets could fall further in order to return to previous affordability levels.
