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Housing Affordability As The New Gold Standard

Luxury properties catch eyes. Affordable markets build wealth.

I’ve been investing in U.S. real estate as a foreigner since 2016, acquiring over 120 properties across multiple markets. On my own journey, one metric has consistently proven more valuable than any other: housing affordability.

When I first started buying rental properties the US, I always looked at the fundamentals – stable job markets, growing populations, and rising household incomes. Now don’t get me wrong, these are still really important, but affordability is the ultimate indicator of market health and investment potential.

Related: US Cities With The Most Home Sale Cancellations

Measuring True Affordability

I look at median income versus median purchase price as a starting point. Ideally, renters and buyers should spend less than 30% of their income on housing.

In coastal cities like those in California, this ratio can be more than 50%. Meanwhile, in Cleveland for example, homeowners spend less than 20% of their income on housing costs, and renters spend around 27% – making it the 5th most affordable city in the U.S. according to WalletHub’s affordability study.

This isn’t just an academic exercise. When locals can’t afford to rent or buy, it’s a solid signal that the market is overheated. Just look at what’s happening in California right now.

For me, the Midwest stands out as the most affordable in the nation with a Housing Affordability Index value of 134.2, meaning median family income significantly exceeds the qualifying income needed to purchase a typical home, according to the National Association of Realtors.

Related: Is the US heading Towards a Property market Crash and Debt Bubble in 2025

The Shift Away From Coastal Markets

The smart money is heading toward Northeast and Midwest markets that are significantly more affordable than coastal areas.

Our overseas clients want to own stable assets that support long-term wealth generation plans. Markets like Cleveland offer both steady equity growth and strong cashflow potential.

Cleveland’s real estate has experienced 7.5% appreciation over the past year while maintaining prices that average 40% below national levels, according to recent market analysis.

What makes affordable markets so attractive? They tend to have solid rental demand. Better quality properties remain consistently occupied, translating into stable cashflow for investors. They also appreciate well over time because demand is strong. If locals can afford to buy homes, houses prices are genrally well-supported.

Related: Top US Housing Markets for First Time Investors in 2025

Common Mistakes In Affordable Markets

One of the biggest mistakes I see is foreign investors buying supposedly “high cashflow” houses in D-Class neighborhoods.

These properties look great on paper due to their high rent-to-price ratio. But in my experience, they come with a problematic tenant base, leading to high management costs, rent delinquencies, evictions, and vacancies.

Properties in these markets typically exist in poor condition. Much of that promised cashflow ends up funding endless repairs and capital expenditures.

Investors seeking stability should focus on C+ to B-Class neighborhoods with a more reliable tenant base and better quality homes.

Related: Top 10 US Counties for Single Family Home Investors

Remote Due Diligence That Works

For foreign investors who can’t physically visit properties, proper due diligence becomes even more critical.

We’ve developed strong relationships with teams on the ground in our target markets. We use independent home inspectors for general inspections, roof assessments, and sewer scopes.

Our focus remains on fully renovated houses that attract quality tenants and limit operational costs. This approach translates into better ROI and fewer headaches.

Related: The Top 10 Most and Least Affordable Housing Markets in the US in 2025

Financing Strategies For Foreign Investors

Most of our clients use DSCR (Debt Service Coverage Ratio) loans to purchase rental properties. These loans offer up to 75% loan-to-value and 30-year fixed interest rates starting around 6.75%.

This means you can purchase a $175,000 home generating $20,000 in annual rental income with about $50,000 in cash.

Using this leverage, investors can achieve approximately 40% p.a. annual ROI over 10 years with just 5% annual capital appreciation and 3% annual rent growth.

You don’t need to chase risky high-cashflow deals to succeed. Focus on stable, lower-risk markets and let time do the heavy lifting.

Related: The Best USA Mortgages for Foreign Nationals in 2025

Beyond Affordability: Additional Indicators

While affordability provides our primary metric, we also analyze other key indicators.

A stable jobs market remains one of the most important factors. Cleveland’s healthcare sector, anchored by the Cleveland Clinic with 38,000 employees, provides the economic stability that appeals to investors seeking recession-resistant rental markets.

We also examine population trends at a hyper-local level. We want to buy houses in neighborhoods where people are actively moving to, not from.

Contrary to popular belief, remote work hasn’t significantly impacted our investment strategy. Most companies have issued return-to-work orders, so we continue focusing on housing within short commutes to major employment centers.

Related: Top 5 Riskiest US Property Markets in 2025

Emerging Trends: Multi-Generational Housing

One growing trend we’re watching closely is multi-generational housing. Approximately 21% of Gen X buyers are purchasing homes specifically for multi-generational living.

This trend appears across all markets and is partly driven by affordability concerns. Simply put, it’s more economical for families to live together.

For investors, this suggests increasing demand for larger homes with multiple bathrooms and separate living spaces.

Related: Growing Housing Affordability Gap Creating Golden Opportunity for Investors

Interest Rates And Foreign Investment

Higher interest rates have squeezed affordability for local buyers by increasing mortgage payments. For international investors, this presents less of a challenge.

Foreign buyers have historically paid slightly higher interest rates anyway. Many of our clients come from Latin America, where interest rates can reach 100% – making U.S. rates of 7-8% appear quite reasonable.

As long as a property generates sufficient cashflow to cover operational costs and debt service, we can make the deal work.

Related: 10-Year US Interest Rate Forecast from the Experts

The Affordability Advantage

Affordability has become our north star when evaluating U.S. real estate markets. It correlates strongly with rental demand, investment stability, and long-term appreciation potential.

For foreign investors seeking sustainable returns, looking beyond coastal glamour to affordable markets offers a clear path to building wealth through U.S. real estate.

Focus on markets where locals can comfortably afford their housing costs, and you’ll find properties that deliver both immediate cashflow and long-term appreciation.

FREE DOWNLOAD: 10 Costly Mistakes Foreigners Make Buying U.S. Real Estate