Rising home prices and high mortgage rates have challenged potential home buyers across the country, and for would-be buyers in seven cities, the bar has been set higher. A recent analysis by mortgage data provider HSH.com finds homeownership continues to be out of reach for all but the highest earners in these metropolitan areas.
To arrive at its figures, HSH.com used the latest quarterly home-price information from the National Association of Realtors. It incorporated local property tax and homeowner’s insurance costs to calculate the income needed to qualify for a median-priced home.
HSH.com calculated the annual before-tax income required to cover the mortgage’s principal, interest, property tax and homeowner’s insurance payment. The study also used industry-standard mortgage-to-debt earnings ratios and a 20% down payment subtracted from the median home price data. The median price is the figure in the middle of a data set in which half of the houses are priced for less and half are priced for more.
San Jose, California was the only metropolitan area to see a year-over-year decline in median home prices. The median home prices in 49 other metro areas ranked in the study stayed the same or saw an increase. But don’t get the idea that San Jose is more affordable. The San Jose metro area remains the most expensive, even with a 1.57% decline in median prices.
The 49 other metropolitan areas posted annual gains that ranged from none (0.0% in the Philadelphia area) to 10.61% in the Las Vegas area.
Here’s a look at seven metro areas where you will need to earn a six-figure annual salary to buy a median-priced home.
1. San Jose, California
In the San Jose metro area, you need to earn at least $254,835 to afford the median-priced house at $1.25 million with a 30-year fixed-rate mortgage at 4.98% and a 20% down payment, making it the most expensive region in the country. The monthly payment would be $5,946. If you only put down 10%, you would need a salary of $294,779.
2. San Francisco
Head north of San Jose to San Francisco, and you’ll find the median home price is $952,200. If you want to buy a house in the City by the Bay, you will need to earn at least $198,978. The monthly payment would be $4,642.82. If house hunters in the San Francisco metro area put 10% down instead of 20%, the required salary increases to $229,404.88.
3. San Diego
While home prices in the San Diego metro area are lower than in San Jose and San Francisco, a house hunter will still need to earn at least $131,640 to buy a home with a median price of $626,000. The monthly mortgage payment would be $3,071.62. If home buyers put 10% down instead of 20%, the required salary rises to $153,656.31.
4. Los Angeles
In the densely populated city of Los Angeles, the salary drops to $123,156 to buy a home with a median price of $576,100. If buyers in the Los Angeles metro area put 10% down instead of 20%, the required salary increases to $141,564.87.
Would-be buyers in the Boston metro area would need to earn at least $106,789 to buy a home with a median price of $460,300. If buyers put 10% down instead of 20%, the required salary increases to $122,881.89.
6. New York
A home buyer needs to earn a salary of at least $105,684 to buy a place in the New York metro area with a median price of $403,900. The monthly payment would be $2,465.97. If home buyers put 10% down instead of 20%, the required salary rises to $119,804.57.
Would-be buyers in the Seattle metropolitan area need to make at least $105,367 to buy a home with a median price of $489,600. The monthly payment would be $2,458.58. If buyers put 10% down instead of 20%, the required salary increases to $122,484.17.