US cities where you need to earn more than $200,000 to afford a home
Homeownership costs continue to crowd out all but the wealthiest buyers, and would-be homeowners now need to earn $200,000 or more in eight U.S. cities to afford a typical home, according to a new study.
Mortgage payments in the United States have increased by an average of 45.6% over the past year. And with interest rates for 30-year fixed-rate mortgages hovering around 7%, homebuyers need to spend more just to meet rising financing costs, according to new analysis from real estate platform Redfin. .
On average, a homebuyer in the United States needs to earn $107,281 to pay a median monthly mortgage payment of $2,682, up from $73,668 a year ago in October, according to Redfin.
But homeownership costs also vary widely by market, with many cities needing significantly more income to pay monthly mortgage payments for a typical home. Of the 100 largest metropolitan areas in the United States, these eight markets are ranked as the least affordable, based on income need.
1. San Francisco
Median house price: $1,497,000
Income needed to afford a house at the median price: $402,821
2. San Jose, California
Median house price: $1,350,000
Income needed to afford a house at the median price: $363,265
3. Anaheim, California
Median house price: $945,000
Income needed to afford a house at the median price: $254,286
4. Oakland, California
Median house price: $920,000
Income needed to afford a house at the median price: $247,559
5.Los Angeles
Median house price: $823,500
Income needed to afford a house at the median price: $221,592
6.San Diego
Median house price: $790,000
Income needed to afford a house at the median price: $212,577
7. Oxnard, California
Median house price: $782,500
Income needed to afford a house at the median price: $210,559
8.Seattle
Median house price: $763,000
Income needed to afford a house at the median price: $205,312
With a chronic housing shortage and some of the wealthiest residents in the United States, California contains many of the most expensive markets to buy a typical home, with seven requiring incomes of $200,000 or more.
New York City wasn’t far behind on the list, placing 11th overall. To afford a median-priced home in the Big Apple, you would need an income of $178,942 to meet the payments.
For the purposes of the study, mortgage payment affordability assumes that a given homebuyer spends no more than 30% of their income on housing — a common rule of thumb for expense budgeting.
Median home prices are based on Redfin sales data between October 2021 and October 2022, and median mortgage payments assume the buyer has made a 5% down payment. Mortgage rates are based on October 2021 and October 2022 average rates, which are 3.1% and 6.9% respectively.
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