Much of the discussion around why home building hasn’t returned to pre-recession levels yet has centered on people’s inability to afford homes in the U.S., whether it’s the high prices of homes, exorbitant rent costs, suffocating student debt, lack of jobs, or a number of other issues.
We took a look at the area median incomes in 25 cities in the U.S., according to Census data, and compared it to the salary needed to afford a home in those areas, as estimated by mortgage site HSH.com.
The site recently updated its necessary salary projections for median home prices using data from the third quarter, which saw mortgage rates dip. HSH.com considered the median home prices, interest rates for 30-year fixed-rate mortgages, property taxes, and insurance costs – still noting these were only the basic costs of buying a home, which excludes incidentals or maintenance.
For the most part, median income and the necessary salary to afford a home at the median home price were relatively similar, which is good news for builders.
For 11 of the 25 metros, median incomes had a sizable advantage over the needed salaries to buy a home a median price, including Washington, D.C., where the median income is $91,193 and the necessary income to buy a median priced home was $78,460. Other areas like this included Houston, Baltimore, Atlanta, Cincinnati, and Pittsburgh.
The most concerning are the top nine metro areas where the median income was at a 10% deficit of the necessary salary for a median priced home. Not shockingly, San Francisco and San Diego top the list. San Francisco’s median home price of $835,400 requires a salary of $152,173, while the median household income is $83,222. San Diego’s median income of $66,192 is only roughly 60% of the necessary salary to buy a home at the median price in the area.
Other cities with a greater than 10% deficit between median income and salary necessary to purchase a median-priced home in the area included Los Angeles, New York, Miami, Seattle, Boston, Portland, Sacramento, and Denver.
