Home prices in these 8 cheap cities are primed for outsize appreciation amid the worst US housing affordability crisis in 40 years, says Zillow's chief economist

• US housing affordability is near its lowest levels in four decades.
• Zillow's Chief Economist Skylar Olsen predicts lower-cost cities will benefit from this.

With mortgage rates still elevated and home prices shooting back to all-time-highs in recent months, housing affordability in the US is near its worst levels in four decades, according to the National Association of Realtors' Housing Affordability Index.

For Zillow Chief Economist Skylar Olsen, this means homes around the country that are relatively cheap should have tailwinds for appreciation in the years ahead.

"Because we have such affordability challenge, I think you could expect that kind of investment — that's going to most certainly be a place that appreciates into the future," Olsen told Business Insider last week.

While cheaper homes in every market should outperform, Olsen also said that the affordability crisis means that lower-cost cities around the US are well-positioned for appreciation.

"For example, the midwest is appreciating faster and yet is a much more feasible market to break into," Olsen said.

In the interview, Olsen listed eight cities she sees benefiting from their more affordable prices. Most of them have median home prices below the national median sale price of $324,967, according to Zillow data, and most have lower monthly mortgage payments than the national average of $1,809.

Six of the cities are also in the Midwest, except for Hartford, Connecticut, and Providence, Rhode Island, which she said are well-positioned given that they are relatively cheap compared to nearby Boston and New York.

In addition to mostly being cheap on an absolute basis, most of the cities are cheap on a relative basis. Olsen has an affordability metric that measures how many years it would take to save up a 10% payment by saving 5% of local incomes. The national average as of February 2024 is 8.6 years, and most of the eight cities fall below that mark.

The eight cities Olsen listed are compiled below in no particular order. Median home price sale data (list price for Hartford) is included, as well as data from Olsen's affordability metric and average monthly mortgage payments.

1. Pittsburgh, Pennsylvania

Pittsburgh, Pennsylvania.      Sean Pavone/Shutterstock

Median home price: $200,642

% over/under national median price: -38%

Years it would take to save a 10% down payment by saving 5% of local income: 5.3

Monthly mortgage payment after 20% down payment: $1,053

Source: Zillow

2. Hartford, Connecticut

Hartford, Connecticut.      Sean Pavone/Shutterstock

Median home price (listed): $219,667

% over/under national median price: -32%

Years it would take to save a 10% down payment by saving 5% of local income: 7.4

Monthly mortgage payment after 20% down payment: $1,770

Source: Zillow

3. Providence, Rhode Island

Shutterstock

Median home price: $345,817

% over/under national median price: +6%

Years it would take to save a 10% down payment by saving 5% of local income: 10.2

Monthly mortgage payment after 20% down payment: $2,366

Source: Zillow

4. Chicago, Illinois

The Chicago river.      Courtesy of Channing Muller

Median home price: $318,667

% over/under national median price: -2%

Years it would take to save a 10% down payment by saving 5% of local income: 6.8

Monthly mortgage payment after 20% down payment: $1,588

Source: Zillow

5. Cleveland, Ohio

Yuanshuai Si/Getty Images

Median home price: $85,000

% over/under national median price: -74%

Years it would take to save a 10% down payment by saving 5% of local income: 6.1

Monthly mortgage payment after 20% down payment: $1,123

Source: Zillow

6. Columbus, Ohio

Columbus, Ohio.      Agnieszka Gaul/Shutterstock

Median home price: $220,333

% over/under national median price: -32%

Years it would take to save a 10% down payment by saving 5% of local income: 7.4

Monthly mortgage payment after 20% down payment: $1,576

Source: Zillow

7. Cincinatti, Ohio

Checubus/Shutterstock

Median home price: $206,667

% over/under national median price: -36%

Years it would take to save a 10% down payment by saving 5% of local income: 6.9

Monthly mortgage payment after 20% down payment: $1,514

Source: Zillow

8. Milwaukee, Wisconsin

Sean Pavone/Shutterstock

Median home price: $181,250

% over/under national median price: -44%

Years it would take to save a 10% down payment by saving 5% of local income: 8.6

Monthly mortgage payment after 20% down payment: $1,705

Source: Zillow