How much salary do you need to earn in order to afford the principal and interest payments on a median-priced home in your metro area?
According to HSH.com, which tracks national mortgage and consumer loan information, $72,844.31
Seem like a lot, Be glad you don’t live in San Francisco metro area, the most expensive of all the metros surveyed by HSH — including New York City. In San Francisco your salary would have to be more than $142,000 to buy a median-priced home.
For this recent study, HSH.com crunched the numbers in 27 major metropolitan areas in the U.S. Using the National Association of Realtors’ fourth-quarter data for median-home prices and average interest rate for a 30-year fixed mortgage, the report helps homebuyers figure out how much of their salary they’d have to allocate toward "the base cost of owning a home — the principal, interest, taxes and insurance." According to HSH.com:
We used standard 28 percent "front-end" debt ratios and a 20 percent down payment subtracted from the NAR’s median-home-price data to arrive at our figures. We’ve incorporated available information on property taxes and homeowner’s insurance costs to more accurately reflect the income needed in a given market.
Prices down? Not really
Some might look at fourth quarter trends as positive, as they seem to imply increased affordability. Home prices declined quarter-over-quarter in all of the metros surveyed except one: Tampa, FL. No jaded, battered homebuyer should get too excited about this decline just yet though; year-over-year, home prices are up, and that includes in San Francisco Bay Area cities.
What can you get for the price?
At the low end of the spectrum, we have several options, but for sake of comparison, we chose Cleveland, Ohio. The median price there is $121.2K, which requires a salary a little over $31K per year. Despite the fact that several of the photos in the gallery above seem to be have been taken by a camera hidden in the ceiling, this home is graciously proportioned with good bones: 17416 E Park is a 4-bed, 2.5-bath home of over 1500 square feet with nice yard and oversized garage. Price is below median at $118.9K, which would equal mortgage under $500 per month if putting down 20%.
Somewhere in the middle of the mix is Seattle. Here the median is $352K, requiring a yearly salary of just over $72.8K. This example is also below the median, asking $330K. 7811 S 113th St is a retro 50′s-style 4 bed, 2 bath of over 2000 square feet with yard and garage. The mortgage on a 30-yr-fixed would be a little over $1540 a month.
Finally, looming at the top, is San Francisco. The median per this data (which considers the metro area and rather than the city property, thus lowering the city-wide median) is $740K. This means the buyer must earn over $140K per year. At that price, one could buy a studio condo or tenancy-in-common, but to compare more apple to apple we found this single-family home in Visitation Valley, perhaps one of the last neighborhoods one can find a single-family home in this price range. Listed at $719K, 1100 Brussels St. is a 3 bed, 2 bath situated nicely for city views. Given that the area has become more in demand lately, it’s likely this one will sell for above asking. How much more? Readers can speculate in the comments. And, by the way, at the original asking, the mortgage would be just under $2850 per month–which in this city might actually be considered reasonably affordable.