Home ownership costs continue to squeeze out all but the wealthiest buyers, and potential 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 an average of 45.6% over the past year. And with 30-year fixed-rate mortgage rates hover near 7%homebuyers have to spend more just to keep up with rising financing costs, according to a new analysis by real estate platform Redfin.
The average U.S. homebuyer needs to earn $107,281 to afford an average monthly mortgage payment of $2,682, up from $73,668 a year ago as of October, Redfin found.
But the cost of ownership also varies widely by market, with many cities requiring much more income to afford the monthly mortgage payments on a typical home. Of the 100 largest U.S. metropolitan areas, these eight markets ranked as the least affordable based on income needs.
1. San Francisco
Average home price: $1,497,000
Income needed to afford an average-priced home: $402,821
2. San Jose, California
Average home price: $1,350,000
Income needed to afford an average-priced home: $363,265
3. Anaheim, California
Average home price: $945,000
Income needed to afford an average-priced home: $254,286
4. Oakland, California
Average home price: $920,000
Income needed to afford an average-priced home: $247,559
5. Los Angeles
Average home price: $823,500
Income needed to afford an average-priced home: $221,592
6. San Diego
Average home price: $790,000
Income needed to afford an average-priced home: $212,577
7. Oxnard, California
Average home price: $782,500
Income needed to afford an average-priced home: $210,559
8. Seattle
Average home price: $763,000
Income needed to afford an average-priced home: $205,312
S chronic housing shortage and some of the wealthiest US residents, 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, ranking 11th overall. To afford a median-priced home in the Big Apple, you need to have an income of $178,942 to keep up with the payments.
For the purposes of the survey, mortgage affordability assumes that a homebuyer spends no more than 30% of their income on housing – generally accepted rule of thumb for cost budgeting.
Average home prices are based on Redfin sales data between October 2021 and October 2022, and average mortgage payments assume a buyer has made a 5% down payment. Mortgage rates are based on the average rates for October 2021 and October 2022, which are 3.1% and 6.9% respectively.
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