Housing Affordability in a Shifting Economy
Housing Affordability in a Shifting Economy
Our STI Market Reports give decision-makers more than just housing prices—they reveal the real-world accessibility of housing by pairing two key measures: Affordability and Mortgage Risk.
Affordability Ratio compares average home values to household incomes, classifying markets as:
Affordable (<3)
Accessible (3–5)
Costly (5–7)
Steep (>7)
Mortgage Risk measures the share of household income needed to support a new mortgage, revealing whether those homes are truly within reach.
When these metrics are viewed together, the results often tell a more complex story than prices alone can. Comparing Seattle–Bellingham, Springfield–Decatur, and Chattanooga reveals those differences are also magnified by broader economic forces.
Seattle–Bellingham, WA: Costly and High Risk
Affordability Ratio: 6.4 (Costly)
Mortgage Risk: 4.1 (Extremely High)
Seattle–Bellingham sits firmly in the high-barrier zone. Home prices are well above the national average relative to income, and the proportion of income needed to cover a new mortgage is significant. For developers, investors, and policymakers, this market represents both strong demand and a pressing affordability challenge.
Springfield–Decatur, IL: Affordable and Low Risk
Affordability Ratio: 2.4 (Affordable)
Mortgage Risk: 2.0 (Low Risk)
Springfield–Decatur offers a rare combination: homes that are comfortably priced and mortgages that place minimal strain on household budgets. This environment can support steady retail growth, attract first-time buyers, and create stability for long-term investments.
Chattanooga, TN–GA: Accessible but Moderate Risk
Affordability Ratio: 4.2 (Accessible)
Mortgage Risk: 3.1 (Moderate Risk)
Chattanooga’s home prices are manageable for many households, but mortgage burdens are creeping into the moderate range. This dynamic suggests a market in transition—still appealing for growth but one to watch for affordability pressure.
Economic Forces at Play
- Labor Market Headwinds
Job growth has decelerated sharply: July added just 73,000 jobs, while May and June revisions slashed 258,000 positions from prior estimates, highlighting underlying fragility. Long-term unemployment now impacts nearly 1 in 4 jobseekers, its highest level since December 2021. - Inflation & Tariff Pressures
Inflation remains sticky—with core CPI up 3.1% as of July, driven by durable goods, housing, and services. Tariffs are a key contributor, particularly in construction and consumer goods, further squeezing affordability and building costs. - AI and Job Automation
AI continues to reshape the labor landscape: major employers are reducing staff, and analysis suggests Microsoft alone could cut up to 36% of its workforce. This poses long-term uncertainties for households in higher-cost markets like Seattle. - Federal Workforce Disruptions
Federal mass layoffs—across departments like HHS, IRS, and GSA—alongside an extended hiring freeze, have implications for regional employment and demand in adjacent housing markets. - Demographic & Labor Supply Constraints
A sharp decline in immigration, paired with an aging population, could seriously slow future job growth—straining both housing demand and affordability over the next few years.
What This Means for Stakeholders
- In Seattle, affordability challenges are deepened by both macroeconomic and demographic headwinds. This market demands creative, targeted interventions.
- Springfield–Decatur appears stable enough to ride out near-term storm clouds, but long-term inflation and supply constraints could shift its profile.
- In Chattanooga, rising risk looms—watch labor trends and consumer spending closely as housing costs grow.
By tracking these indicators in tandem with economic trends, you don’t just see where housing is headed—you understand why, and how to react strategically.
Explore the data presented here and other free market reports here.