The cost of homeownership continues to weigh on all but the wealthiest buyers, and prospective homeowners now need to earn $200,000 or more in eight U.S. cities to afford a typical home, a new study finds.
Mortgage payments in the US have increased by an average of 45.6% over the past year. And with interest rates on 30-year fixed-rate mortgages hovering near 7%, homebuyers need to spend more to keep up with rising borrowing costs, according to a new analysis from real estate platform Redfin.
On average, a home buyer in the US needs to earn $107,281 to pay an average monthly mortgage payment of $2,682.
But the cost of homeownership also varies widely by market, with many cities requiring much more income to pay the monthly mortgage payments for a typical home. Of the 100 largest metropolitan areas in the US, these eight markets were the least affordable, based on income needs.
1. San Francisco
Median house price: $1,497,000
Income needed to afford a mid-price home: $402,821
2. San Jose, California
Median house price: $1,350,000
Income needed to afford a mid-price home: $363,265
3. Anaheim, California
Median house price: $945,000
Income needed to afford a mid-price home: $254,286
4. Oakland, California
Median house price: $920,000
Income needed to afford a mid-price home: $247,559
Median house price: $823,500
Income needed to afford a mid-price home: $221,592
Median house price: $790,000
Income needed to afford a mid-price home: $212,577
7. Oxnard, California
Median house price: $782,500
Income needed to afford a mid-price home: $210,559
Median house price: $763,000
Income needed to afford a mid-price home: $205,312
With a chronic housing shortage and some of the wealthiest residents in the US, 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 was not far behind the list, ranking 11th overall. To afford a mid-priced house in the Big Apple, you would need an income of $178,942 to keep up with the payments.
For the purposes of the study, mortgage payment affordability assumes that a given home buyer spends no more than 30% of their income on housing — a general rule of thumb for budgeting expenses.
Median house 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. The mortgage rates are based on the average rates of October 2021 and October 2022, 3.1% and 6.9% respectively.
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