For most Americans, housing is by far the largest monthly expense, claiming the lion’s share of their income—but a handful of cities in the Midwest and the East offer some relief from mortgage burden by leaving more money in homeowners’ pockets.
Detroit topped the list of the most undervalued housing markets in the U.S., with the typical homeowner there spending a mere 17% of their per capita income on housing expenses, according to an analysis of the latest available data drawn from the U.S. News Housing Market Index, U.S. News & World Report’s online platform offering a snapshot of the domestic housing market.
An undervalued housing market is defined by the outlet as one where households spend significantly less on housing costs as a share of income than the national average.
The Department of Housing and Urban Development classifies households spending more than 30% of their gross monthly income on housing as being “cost-burdened,” meaning that people are left with a smaller share of their earnings to spend on other essentials, such as food, health care, and transportation.
The national average share of income spent on housing monthly stands at around 36% for homeownership, based on the latest available figures from November 2024.
Anything that falls far below that benchmark points to an undervalued market, according to U.S. News & World Report’s study.
It’s important to keep in mind, however, that while the 36% figure is the average, payment-to-income ratios can vary widely between metros.
For example, first-time homeowners in Boston were shelling out a staggering 66% of their monthly income in 2024, according to a report from NerdWallet.
Four of the five most undervalued markets on the list are in the Midwest’s Rust Belt, with the Motor City leading the pack with a payment-to-income ratio that’s less than half the national average.
Behind the Motor City at No. 2 is Cleveland, where a typical homeowner spends 19.1% of their income on housing-related expenses.
Philadelphia is close behind, with 19.9%.
“Homes in Detroit and Cleveland are low-priced relative to both the country and to local incomes,” says Realtor.com® senior economic research analyst Hannah Jones.
“Both of these Rust Belt cities faced their share of economic challenges in the past, which led to falling local populations and, as a result, lower housing demand. Low demand kept home prices low in these areas, well below the national level for the last 20 years.”
According to Jones, in recent years, both Detroit and Cleveland have been experiencing a comeback fueled by a combination of new economic opportunities and low cost of living, which has been attracting more affluent homebuyers.
“As a result, strong local income levels and ample housing supply has kept home prices low, resulting in a favorable home cost-to-income ratio,” Jones adds.
Closing out the top five undervalued markets are St. Louis and Oklahoma City, OK, with 20.7% and 23.2% payment-to-income ratio, respectively.
Notably, recent data analysis from Realtor.com found that more than 62% of households in Detroit and St. Louis can afford a home, and the median household income needed to buy a typical home in those cities is below $73,000.
Most undervalued markets to rent a home
Perhaps not surprisingly, the most undervalued markets to rent a home are also clustered in the Midwest and the East, with Detroit once again getting top billing with the lowest payment-to-income ratio of 19.1%, a far cry from the national average of 32%.
Columbia, SC, ranks No. 2 on the list of most undervalued homes to rent with 19.9%, followed by Philadelphia, Cleveland, and Chicago, each posting a share of just north of 22%—and still far below the national average.
Renting vs. buying in undervalued markets
House hunters deciding whether they should buy a home or rent one might want to pay attention to the difference between payment-to-income ratios.
Nationally, owning a home costs about 4.2% more than renting one.
However, in Detroit, where home prices are relatively low, the median monthly mortgage payment is nearly 8% less than renting.
Likewise, Americans looking to save on housing could be better off buying rather than renting in Columbia, SC, Philadelphia, Cleveland, and Chicago, where the buy-vs-rent ratios range between 6.26% and 2.44%.
