How Much You Need to Earn to Buy a Home in 50 Largest US Cities

February 25, 2019 by Paul Ausick

The partial federal government shutdown in December and January has delayed publication of what most economists consider the “official” data on any number of U.S. economic categories. One is new home sales and a related one is new home prices.

Last Friday, online real-estate brokerage Redfin published its estimate of new home prices for the month of January. The price was 8% below the January 2018 new home price. Home price data is due Tuesday when the S&P CoreLogic Case Shiller home price index is published. The consensus estimate calls for home prices to be 4.8% higher than a year ago.

On Monday, HSH.com, an online source for mortgage data, released its calculations of the salary required in order for homebuyers to afford a home in the 50 largest U.S. metro areas. New home prices declined in 46 of 50 cities between the third and fourth quarters of 2018 compared with a decline in 43 of 50 in 2017. The four cities that defied the trend last year were Phoenix, Las Vegas, Salt Lake City and Nashville.

In some markets, slowing sales may be leading to lower asking prices. At a minimum, sellers are accepting bids below the listed price, according to HSH.com:

While by no means widespread across the country, there is certainly growing evidence that the rate of annual price increases has started to soften. Nationally, for example, the current year-over-year increase in the median price of an existing home sold in the fourth quarter rose just 3.95% compared to the same period in 2018; this figure was 4.63% in the third quarter, 4.93% in the second and 5.64% in the first quarter, so the cooling trend does seem in place.

In calculating the salary needed to buy a home in the 50 metro areas, HSH.com used the National Association of Retailers (NAR) fourth-quarter data for median home prices, national mortgage rate data from Freddie Mac and 30-year fixed rate mortgage interest rates published by the Mortgage Bankers Association. The firm added property taxes and homeowners’ insurance costs to make the determination of how much a buyer needs to earn to afford a median-priced home based on a total debt-to-income ratio of 28% with a 20% down payment.

Here are the five cities where salaries must be highest in order to afford a median-priced home.

  1. San Jose, California: Salary of $254,836; median home price, $1.25 million
  2. San Francisco, California: Salary of $198,978; median home price, $952,200
  3. San Diego, California: Salary of $131,641; median home price, $626,000
  4. Los Angeles, California: Salary of $123,156; median home price, $576,100
  5. Boston, Massachusetts: Salary of $106,790; median home price, $460,300

The five cities where salaries are lowest are:

  1. Pittsburgh, Pennsylvania: Salary of $37,660; median home price, $141,625
  2. Cleveland, Ohio: Salary of $40,438; median home price, $150,100
  3. Oklahoma City, Oklahoma: Salary of $41,335; median home price, $161,000
  4. Memphis, Tennessee: Salary of $41,401; median home price, $174,000
  5. Indianapolis, Indiana: Salary of $42,289; median home price, $185,200

For the full list of all 50 cities is available at the HSH.com website.

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