The Lone Star state has gotten a lot of good press lately for coming through the economic downturn relatively unscathed. Thanks to that strong state economy, housing in Texas’ biggest cities, including Houston, San Antonio and Austin, never suffered from the plunge in property values that struck the rest of the United States in the last few years.
So it wouldn’t surprise you to see them top a list of the nation’s most overpriced cities, places where the cost of living–especially housing prices–are the highest compared with median income.
Yet none of them make our list. They didn’t even come close. But we were surprised when we ran the numbers and found another Texas town within the top five: McAllen. Known for its hardscrabble economy and high unemployment, the City of Palms suffers from an 11.7% jobless rate–and the lucky folks who do find work don’t tend get a fat paycheck. The U.S. Census Bureau crowned McAllen America’s urban poverty capital for 2010 with a 33.4% rate.
So while the cost of groceries, clothing and gas—and even housing, with a median price of 107,000–are low compared with a lot of other cities in America, this border city of 741,000 is still comparatively one of the toughest places to make ends meet anywhere. “It’s still hard to buy a house even if it’s cheap because there are low incomes,” says David Crowe, chief economist of economics and housing policy for the National Association of Home Builders (NAHB).
Behind the Numbers
To find the most overpriced cities, we started with America’s 100 largest Metropolitan Statistical Areas (MSAs) and Metropolitan Divisions (MSADs), all with populations of more than 600,000 residents or more. We then ranked these places based on four metrics, placing an equal weight on each metric.
First we looked at housing affordability, using the Housing Opportunity Index (HOI) compiled by the NAHB and Wells Fargo. The quarterly index weighs median prices for homes sold against median income levels to determine the percentage of local residents who could afford to buy a home.
Next we assessed the cost-of-living index created by Sperling’s Best Places to gauge the cost of food, utilities, gas and a variety of other everyday expenses in each area. Cities that clock a cost-of-living rank above 100 represent places where these goods cost more than the national average. Since some expensive cities are balanced out with high incomes, we factored in the median salaries for residents with a BA degree or higher to see just how far a paycheck actually stretches in each of these cities, using data from Payscale.com. Last, we included local unemployment rates collected from Moody’s Economy.com and the Bureau of Labor Statistics.
Here are the top 10 most overpriced cities in America:
8 (tie). San Jose, Calif.
MSA: San Jose-Sunnyvale-Santa Clara, CA
Housing Affordability: 51.5%
Unemployment rate: 9.8%
Median Salary (for college grads): $92,100
Cost-of-Living: 175
 |
| San Jose, Calif. Photo: Bernd Geh/Getty Images |
MSA: North Port-Bradenton-Sarasota, FL
Housing Affordability: 72.6%
Unemployment rate: 10.4%
Median Salary (for college grads): $52,000
Cost-of-Living: 100
 |
| Bradenton, Fla. Photo: Forbes.com |
Housing Affordability: 40%
Unemployment rate: 5.7%
Median Salary (for college grads): $53,900
Cost-of-Living: 180
 |
| Honolulu, Hawaii Photo: Peter Photo/iStockphoto |
Housing Affordability: 55.5%
Unemployment rate: 10.2%
Median Salary (for college grads): $47,700
Cost-of-Living: 82
 |
| El Paso, Texas Photo: Denis Jr. Tangney/istockphoto |
MSAD: West Palm Beach-Boca Raton-Boynton Beach, FL
Housing Affordability: 74%
Unemployment rate: 10.4%
Median Salary (for college grads): $54,700
Cost-of-Living: 112
 |
| West Palm Beach, Fla. Photo: Thinkstock |
MSA: Providence-New Bedford-Fall River, RI-MA
Housing Affordability: 75.9%
Unemployment rate: 10.2%
Median Salary (for college grads): $55,000
Cost-of-Living: 129
 |
| Providence, R.I. Photo: Thinkstock |
MSA: McAllen-Edinburg-Mission, TX
Housing Affordability: 53.4%
Unemployment rate: 11.7%
Median Salary (for college grads): $44,900
Cost-of-Living: 75
 |
| McAllen, Texas Photo: City Data Via Wikipedia |
MSAD: Miami-Miami Beach-Kendall, FL
Housing Affordability: 61.3%
Unemployment rate: 10.2%
Median Salary (for college grads): $55,700
Cost-of-Living: 112
| Miami, Fla. Photo: Thinkstock |
Housing Affordability: 77.4%
Unemployment rate: 15.8%
Median Salary (for college grads): $50,600
Cost-of-Living: 109
 |
| Fresno, Calif. Photo: ZUMA Press/Newscom |
MSAD: Los Angeles-Long Beach-Glendale, CA
Housing Affordability: 45.1%
Unemployment rate: 11.9%
Median Salary (for college grads): $62,900
Cost-of-Living: 144
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| Los Angeles, Calif. Photo: iStock |
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