Income needed to buy a home a comparison of several US cities

csuave · August 2016

I did not fact check this article so I'm not sure how accurate it is but it is interesting to look at. Based on MM board discussions I expected Denver to be higher.
http://www.huffingtonpost.com/entry/income-to-buy-home_us_57bca543e4b03d51368b32d0

LillibetteV · August 2016

This article leaves me with so many questions! What kind of house are we talking about? I can't say that I agree with the Boston assessment if you are expecting buyers to have 20% down. What is the median age for these buyers? At $87k, it would take a long time to build up 20% especially with the rents being so high.

I bought my house at age 28 in a nice Boston suburb with 5% down using our low-income first time home buyer program. I was on the cusp of not qualifying so I could either (a) buy then with less than 20% or (b) get my expected raise, get disqualified from the program, and somehow save up another $50k while paying a steadily increasing rent. Oh, and by the time I would have saved that extra $50k it wouldn't actually be enough for a down payment anymore. At the time I bought it the PITI was about 23% of our household income (I bought the house alone, but knew I had a roommate in my then boyfriend, now husband). With raises and refinancing it's now less than 15% of our income so it's not like we bought more than we could afford by only putting down 5%.

csuave · August 2016

LillibetteV said:

This article leaves me with so many questions! What kind of house are we talking about? I can't say that I agree with the Boston assessment if you are expecting buyers to have 20% down. What is the median age for these buyers? At $87k, it would take a long time to build up 20% especially with the rents being so high.

I bought my house at age 28 in a nice Boston suburb with 5% down using our low-income first time home buyer program. I was on the cusp of not qualifying so I could either (a) buy then with less than 20% or (b) get my expected raise, get disqualified from the program, and somehow save up another $50k while paying a steadily increasing rent. Oh, and by the time I would have saved that extra $50k it wouldn't actually be enough for a down payment anymore. At the time I bought it the PITI was about 23% of our household income (I bought the house alone, but knew I had a roommate in my then boyfriend, now husband). With raises and refinancing it's now less than 15% of our income so it's not like we bought more than we could afford by only putting down 5%.

The article does leave a lot of questions. The more detail link says the Boston house would cost $435,800. Based on what I saw with other cities I'm more familiar with I'm guessing these are for modest houses, possibly a little outside of the actual city or in need of some work.

Since the article doesn't have a lot of detail I don't know that it is super useful other than for me to look at and say I guess I don't want to move to San Francisco any time soon!

LillibetteV · August 2016

ah - didn't see that you could click in for more detail on the map. There are some cute houses available in the city for that price, but they are either in unsafe or inconvenient locations (we looked at houses in West Roxbury and Roslindale and it took me an hour or more to drive from my old office in Charlestown just to go look at the houses on the other side of the same damn city!) If you want to be in a suburb w/in 10 miles of downtown you are either paying a lot more, you have a serious fixer upper (that's what we did!), or you're in an area with crime and bad school systems.

But also I still can't believe that spending just over $2k/month on an $87k salary is really reasonable. After taxes, retirement, health insurance, and all of life's other expenses that seems pretty tight.

julieanne912 · August 2016

Based on the criteria they mentioned, I do think the Denver # is pretty close. 28% of the monthly income of 72,847 is about $1700/month, which would give you a loan amount in the 350-360 range. It does say "home payment" so I think it just means the mortgage itself... not counting taxes or insurance or HOA fees. Add the 20% down they're assuming you have, and you're in the $420,000 range, which will still buy you a home in most areas except for the high demand ones in Denver, or places like Boulder. (ETA: just noticed it DOES say it includes taxes and insurance, so my #'s are a bit off)

Issue here is, a lot of people here don't have that kind of income. But, the actual data here shows that 400k and below houses are in super super high demand, have 5-10 offers each, etc.

Not to mention, a 2 bedroom apartment in a decent area will cost at least $1700-1800/month, so it's like, do you overpay for a house, but get the benefits of homeownership, or do you just keep tossing your money to rent? Most choose to buy, even if it means doing FHA loans, and taking the big risk of the prices going down.

H and I just talked about this recently, and were like, well, even if the value of our house goes down, which it is bound to at some point since we're in it for the long haul, we still have a place to live and the payment is still less than paying rent for something similar (by $600-800/month).

csuave · August 2016

But also I still can't believe that spending just over $2k/month on an $87k salary is really reasonable. After taxes, retirement, health insurance, and all of life's other expenses that seems pretty tight.

I think it is doable but depends on the person and if having a house is a priority for them. It probably helps if there are no kids and little or no debt in the picture.

My dad was out to lunch with his best friend. His bf has a college educated son in his mid-thirties living in his basement because "he doesn't have enough money for a house." My dad called him out on that statement and told him that if son wanted a house he could make it happen. Dad cited the example of our relative that had a working class job (hairdresser) and lived at home until her early thirties saving up money for a down payment on her own house. She doesn't make much but makes the most of what she has by being MM and spending on what is a personal priority -- house, vacations, clothes and not cable, pets, iphone, expensive cars, etc.

short+sassy · August 2016

Thanks for posting that! It was interesting.

Sniff, sniff...NOLA wasn't included . I feel like the only kid in class to not get a birthday party invitation. I guess we're not "major metropolitan" enough. But Tampa is? Hmmpphh. I was so insulted I even googled it, lol. 2010 Census: Tampa pop. -- 301K, NOLA pop. 358K. With the NOLA metropolitan area being 1.16M.

I was very surprised the Chicago income was only $62K and NYC was only $86K. I would have expected them to be much higher. Heck, they are much lower than Los Angeles ($92K), which has not been my impression of LA vs. NYC...EVER.

Overall, it is probably a good general picture. But, like anything else statistics related, there are going to be a lot of factors involved for any individual person or family...or even city...that can hugely skew those numbers. So it is certainly not a "death knell" on buying a house for anyone who makes below $X income for their area.

For example, the average home price in NOLA is something like $330K. But, in reality, that number is skewed by two areas (one small, one good sized) where the average price is MUCH higher than that. However, you can find nice, good sized houses, great condition, in nice neighborhoods...less than 5 miles from the downtown core...all day long for half that.

And I'm sure a similar concept is true for every city listed. Sure, lower priced areas will bring the average down, but I don't think by nearly as much as the "elite" areas bring it up.

LillibetteV · August 2016

csuave said:

But also I still can't believe that spending just over $2k/month on an $87k salary is really reasonable. After taxes, retirement, health insurance, and all of life's other expenses that seems pretty tight.

I think it is doable but depends on the person and if having a house is a priority for them. It probably helps if there are no kids and little or no debt in the picture.

My dad was out to lunch with his best friend. His bf has a college educated son in his mid-thirties living in his basement because "he doesn't have enough money for a house." My dad called him out on that statement and told him that if son wanted a house he could make it happen. Dad cited the example of our relative that had a working class job (hairdresser) and lived at home until her early thirties saving up money for a down payment on her own house. She doesn't make much but makes the most of what she has by being MM and spending on what is a personal priority -- house, vacations, clothes and not cable, pets, iphone, expensive cars, etc.

I definitely agree with that statement! Buying a house before I was 30 was definitely a top priority for me and I gave up plenty to make it happen.

As for the kids/debt that would definitely make it harder to swing in our area. When we have our first kid daycare alone will cost us at least $350/week (assuming he/she only goes 4 days). We're ready for it, but if we were trying to save up for a down payment after having kids it would be practically impossible - and we make more than the average in that article.

julieanne912 · August 2016

@short+sassy average home price #'s for Chicago are always pretty skewed. There are a large number of dirt cheap houses you can buy on the south side, but they're in areas that nobody would want to live in. Whole neighborhoods worth, similar to, but not as extensive as, Detroit.

I also think that's what interesting about the Denver area... there are very very few areas that have super cheap houses, just like there are very few areas that I'd feel unsafe in. Even houses in the not so great areas have gone way up in price.

cbee817 · August 2016

short+sassy said:

Thanks for posting that! It was interesting.
Sniff, sniff...NOLA wasn't included . I feel like the only kid in class to not get a birthday party invitation.

Don't feel bad- the closest one for me is Pittsburgh, PA and that's not even in our state!

short+sassy · August 2016

julieanne912 said:

@short+sassy average home price #'s for Chicago are always pretty skewed. There are a large number of dirt cheap houses you can buy on the south side, but they're in areas that nobody would want to live in. Whole neighborhoods worth, similar to, but not as extensive as, Detroit.

I also think that's what interesting about the Denver area... there are very very few areas that have super cheap houses, just like there are very few areas that I'd feel unsafe in. Even houses in the not so great areas have gone way up in price.

There are a lot of ways to take an "average", with the most common one being "all values divided by number of values". The article does not say how they did their average but I think, when it comes to home price averages, the top and bottom 10% prices should be eliminated and the more common type of average taken from the rest.

That way, at least some of the gutted/horrible condition and/or super sketch neighborhood houses are eliminated along with the huge, fancy mansions. The average person is not going to be shopping for either one of those types of houses/neighborhoods anyway.

csuave · August 2016

Interesting variation by city in California and Pennsylvania.

I lived one year in Pittsburgh and one year in Philadelphia making the same salary both years. My rent was about double in Philly compared to Pgh -- inline with what the housing map has. To buy a house in Philly I would have had to save longer for a DP or do less than 20%.

The affordability of living in Pittsburgh combined with a decent number of good jobs makes it hard for me to want to move.

smetter04 · August 2016

cbee817 said:

short+sassy said:

Thanks for posting that! It was interesting.
Sniff, sniff...NOLA wasn't included . I feel like the only kid in class to not get a birthday party invitation.

Don't feel bad- the closest one for me is Pittsburgh, PA and that's not even in our state!

Same here, I live in a metropolitan area but it's not included in this assessment. The closest city included is Chicago but it's not really comparable to us. Speaking of Chicago, buying a $246k house on a $67k income seems unrealistic when considering a family's other expenses.

jtmh2012 · August 2016

short+sassy said:

Thanks for posting that! It was interesting.
Sniff, sniff...NOLA wasn't included . I feel like the only kid in class to not get a birthday party invitation. I guess we're not "major metropolitan" enough.

If it makes you feel any better, our area wasn't included either. DC would be the closest, but that's not even a fair comparison and is a couple hours away.

jtmh2012 · August 2016

short+sassy said:

There are a lot of ways to take an "average", with the most common one being "all values divided by number of values". The article does not say how they did their average but I think, when it comes to home price averages, the top and bottom 10% prices should be eliminated and the more common type of average taken from the rest.

Actually, it's not an average. It's the "local median home price". Median being the middle of the highest and lowest numbers, not an average. But, they still leave out a lot of information.

brij2006 · August 2016

Yeah this is definitely off.
H and I had offers in Chicago that would have made our combined income a bit more than the $67k right after college. There was no way we could have afforded to buy a house and we were planning to stay in the outer suburbs where COL is cheaper.

short+sassy · August 2016

jtmh2012 said:

short+sassy said:

There are a lot of ways to take an "average", with the most common one being "all values divided by number of values". The article does not say how they did their average but I think, when it comes to home price averages, the top and bottom 10% prices should be eliminated and the more common type of average taken from the rest.

Actually, it's not an average. It's the "local median home price". Median being the middle of the highest and lowest numbers, not an average. But, they still leave out a lot of information.

Thanks for the correction! I should have read more carefully. Though, a median number sounds like it would be even less accurate.

I do give them credit for including taxes and insurance in their mortgage payment numbers. Those can vary greatly by region, especially the taxes.

But yeah, studies like these can really only be a very general snapshot, no matter how it is sliced.

jtmh2012 · August 2016

short+sassy said:

jtmh2012 said:

short+sassy said:

There are a lot of ways to take an "average", with the most common one being "all values divided by number of values". The article does not say how they did their average but I think, when it comes to home price averages, the top and bottom 10% prices should be eliminated and the more common type of average taken from the rest.

Actually, it's not an average. It's the "local median home price". Median being the middle of the highest and lowest numbers, not an average. But, they still leave out a lot of information.

Thanks for the correction! I should have read more carefully. Though, a median number sounds like it would be even less accurate.
I do give them credit for including taxes and insurance in their mortgage payment numbers. Those can vary greatly by region, especially the taxes.
But yeah, studies like these can really only be a very general snapshot, no matter how it is sliced.

I took it as your standard fluff piece. Somebody needed filler somewhere. Too many unanswered questions.

Xstatic3333 · August 2016

Yeah, I'm with @brij2006. Our closest city on this list is Boston, and H and I made around $87,000 combined before my recent raise. Even with over $80,000 for a DP, I don't think there's any way we would have been comfortable buying in the $400,000s. We do have SLs still, but they're pretty manageable and wouldn't make that much for a difference in these calculations.

als1982 · August 2016

Closest city to me listed is STL. Av. house cost is listed at $170K and an income to afford is $38K. IMO, that's downright dangerous. I made $20K more than that when I bought my house (paid $169K) and it was still tight. Throw in child care and other expenses that I would not have had as a SINK and you'd be drowning! House of cards if you ask me.

jtmh2012 · August 2016

My first house was $130k and I was making $35k at the time. It killed me. Fortunately, my parents helped out and I quickly found another job.

Income needed to buy a home a comparison of several US cities

Re: Income needed to buy a home a comparison of several US cities

Choose Another Board

Search Boards