The price of housing is a major challenge in the United States. Some estimates note that more than 50% of the population cannot afford a median priced home. According to National Association of Home Builders (NAHB), of the total number of new and existing homes sold nationwide during the third quarter, only 40.4 percent were affordable for families earning the median U.S. income of $59,600.

But it is good news that housing affordability on the national level has not changed much in the third quarter in spite of a rise in the mortgage interest rates during the last quarter. This was because many markets saw a slight decrease in their home prices, which helped offset the rise in mortgage rates.

Indianapolis (Indiana) is the most affordable city for homes in America, based on the 2006 third quarter report of the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI). The city achieved this status for the fifth consecutive quarter.

Of the total number of housing units sold in Indianapolis during the third quarter, 86 percent of homes were priced at or below the U.S. median household income of $65,100. Homes in this metro area had a median sales price of $122,000, which is slightly higher from $120,000 of the previous quarter.

It is interesting to note that the most affordable U.S. cities for homes, condos and other real estate are largely from the northern industrial metro areas. The other larger cities that top the list for affordable homes in the third quarter after Indianapolis are Youngstown-Warren-Boardman (Ohio-Pennsylvania); Detroit-Livonia-Dearborn (Michigan); Buffalo-Niagara Falls (New York); and Grand Rapids and Wyoming (Michigan).

The report also lists the top seven smaller cities in America that have the most affordable housing markets. These are: Bay City in Michigan, Springfield in Ohio, Mansfield in Ohio, Lansing-East Lansing in Michigan, Lima in Ohio, Battle Creek in Michigan and Canton-Massillon in Ohio.

For both major metros and small metros, many of the least affordable cities are located in California. The least affordable major metro areas are Santa Ana-Anaheim-Irvine, Modesto, Stockton, and San Diego-Carlsbad-San Marcos, in that order. The least affordable smaller metros (less than 500,000 people) include: Salinas, Merced, Madera, Napa, and Santa Barbara-Santa Maria.

The good news for homebuyers is that there are many affordable cities in the United States. Moreover, even for cities that rated poorly for affordability, there may be some communities within the larger city that have affordable housing. For example, although the San Diego metro in California rated poorly overall for affordability, there are some communities in San Diego priced to meet the needs of lower-income home buyers. A good real estate agent can help you choose a community where you want to live based on your housing budget and needs.