RealEstateEconomyWatch.com Insight and Intelligence on Residential Real Estate
A median-income household can only afford a median-priced home in eight of the nation’s 25 largest metro areas, down from 14 out of 25 a year ago.
It’s harder that it has been for years for a median-income household to afford a median-priced home in the top 25 U.S. markets this year, according to a new Interest.com report.
On average, home prices rose nearly 16 percent over the past year in the 25 cities, while incomes rose by about 3 percent. The national average for a 30-year fixed-rate mortgage rose from 3.70 percent to 4.43 percent. The mortgage rate increase alone added $84.50 to the monthly payment on a $200,000 mortgage.
“The simple fact is that the very small improvement Americans have seen in their paychecks hasn’t kept pace with a jump in home prices and mortgage rates,” said Mike Sante, managing editor of Interest.com.
Atlanta is the most affordable market (a median-income household exceeds the amount required to purchase a median-priced home by 25 percent), and San Francisco is the least affordable (a median-income household falls a whopping 48 percent short of being able to afford a median-priced home).
Most Affordable Metropolitan Areas:
1. Atlanta (+24.92 percent)
2. Minneapolis (+23.86 percent)
3. St. Louis (+17.94 percent)
4. Detroit (+16.87 percent)
5. Pittsburgh (+11.33 percent)
Least Affordable Metropolitan Areas:
21. Miami (-24.56 percent)
22. Los Angeles (-30.31 percent)
23. New York (-35.82 percent)
24. San Diego (-37.71 percent)
25. San Francisco (-47.93 percent)
*Percentages reflect how much the median household income in a metropolitan area exceeds or falls short of the income required to purchase a median-priced home in that area
To determine each rating, Interest.com gathered the median home prices in the 25 largest U.S. metropolitan areas and calculated how much financing would be required for a buyer with a 20 percent down payment. Interest.com entered that amount and city-specific data on 30-year fixed-rate mortgage rates, median household income, median property taxes, average homeowners insurance costs and average household debt into the “Required Income Calculator” on Interest.com. Finally, Interest.com divided the median household income for each city by the income required to finance the median-priced home.
Median Home Price Source: National Association of Realtors, Q2 2013 study of existing single-family homes [Pittsburgh and Detroit were not included in that study, so Q2 2013 data from Real STATS was substituted for Pittsburgh and July 2013 data from RealComp (the Michigan Multiple Listing Service) was substituted for Detroit]
30-Year Fixed-Rate Mortgage Rate Source: Bankrate.com, weekly national survey from October 1, 2013 [Portland (Ore.), Sacramento and San Antonio were not included in that report, so the national average was used for those three markets]
Median Household Income Source: U. S. Census Bureau, 2012 American Community Survey, median household incomes by Metropolitan Statistical Area
Median Property Taxes Source: U. S. Census Bureau, 2012 American Community Survey, median real estate taxes by Metropolitan Statistical Area
Average Homeowners Insurance Source: National Association of Insurance Commissioners, 2010 average premiums by state
Average Household Debt Source: Experian’s 2012 State of Credit Study [Notes: did not include mortgage debt; Interest.com calculated monthly non-mortgage debt payments using an 8 percent interest rate amortized over 60 months]
