The rapid increase in home prices has cooled. The primary reason is that mortgage rates have almost doubled for a 30-year fixed-rate loan. This can add hundreds of dollars to monthly mortgage payments. Americans are also less mobile as the work-from-home economy has faded. The ability to move has always included where people could afford to go. Many people left big, expensive cities for more affordable ones. For people who want to stay in the nation’s largest metros, extremely high prices have not come down. To buy the average-priced home in Seattle, the buyer has to make $400,000. (This is the income you need to be in the 1% in every state.)
RubyHome recently issued a report titled “The Salary Needed to Buy a House (2023).” The methodology included quarterly median single-family home prices for the last quarter of 2022, mortgage rates at 6.66% in the same period, a down payment of 20%, a debt-to-income ratio of 28%, taxes that are 1.25% of the purchase price, insurance that is 0.5% of the purchase price, only single-family homes, and cities defined by Metropolitan Statistical Areas.
The study concluded that the income required to buy the average single-family home in the US in the fourth quarter of last year was $107,107. The study then examined the same formula to calculate the figures for the top 50 markets by population.
It should come as no surprise the income needed to buy a home was lowest in America’s poorest cities. In Detroit, where the median home price is $240,800, the income needed was $67,031. In Cleveland, where the median home price was $208,700, the income needed was $59,026.
The only city where the income needed was over $400,000 was Seattle. The median home price there was $1,577,500. The median income required was $446,163, nearly four times that national figure. It is no wonder many people who could move to less expensive cities did. (These are the most expensive cities to rent a home.)
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