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America's 5 Least-Affordable Housing Markets

BOSTON ( TheStreet) -- America's least-affordable real estate markets all cost big bucks because lots of people want to live there but oceans or other natural barriers leave little available land for additional housing.

"The fundamental unaffordability of these markets hasn't changed despite the fact that home prices are down and we're seeing incredibly low mortgage rates," says Mike Sante of Interest.com, which recently compared median incomes and home prices in America' 25 largest cities.

Interest.com found that families who make local median incomes in 11 of the 25 areas studied don't make enough to qualify for the mortgages they'd need to buy median-priced homes there.

Sante says America's least-affordable cities all combine strong consumer demand with low housing supply due to a lack of open space for added construction.

"Consider San Diego, which is bounded on the west by the Pacific Ocean, on the south by Mexico and on the north by some very, very large military bases," he says. "The only place for San Diego to expand is eastward into the desert -- and that puts a tremendous restriction on development."

By contrast, Sante says that cities Interest.com found have high affordability typically have lots of available land.

"Without getting into a discussion about urban sprawl, the fact is that when can you expand in all directions and have lots of land to build on, that helps hold down local median home prices," he says.

Here's a look at the five cities Interest.com found are the least-affordable places for U.S. homebuyers.

The list was compiled by calculating how much you'd pay each month for a median-priced home in each city, assuming you put 20% down and got a 30-year fixed mortgage that charged the local average interest rate.

Interest.com added median annual local property taxes and homeowners' insurance premiums and looked at whether a family earning a given city's median household income could meet the "28% rule." That standard, which lenders have historically used when deciding whether to OK a mortgage, looks at whether a borrower can pay all monthly housing costs using no more than 28% of gross income.

All median single-family-home prices listed are as of the second quarter, while 30-year fixed-mortgage rates are as of Sept. 19. Median annual household incomes and property taxes are as of 2011, while average annual homeowners' insurance premiums are as of 2009.

"Above-average" and "below-average" figures refer to the average of all 25 cities analyzed -- $50,502 for incomes, $2,331 for property taxes and $880 for insurance premiums. "Average home prices," though, refer to the $229,516 median found in a larger pool of locations that the National Association of Realtors tracks.

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