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What you must earn to buy a home in 25 cities

 

 

PhiladelphiaHow much salary do you need to earn in order to purchase the median-priced home in your metro area?

To find out, HSH.com took the National Association of Realtors’ 2013 first quarter data for median home prices as well as our 2013 first quarter average interest rates for 30-year, fixed-rate mortgages to decipher how much money homebuyers in 25 major metros would need to earn in order to purchase the median-priced home in their market.

With the spring home buying season fully underway, mortgage rates remain at fantastic levels, hitting record lows just a few weeks ago. Given the real estate market’s continued levels of affordability, can you now afford a home that was once out of your reach?

The last time we ran this calculation was in August of 2012. How have things changed since then? Here’s a current look at how much salary you would need to earn in order to purchase the median-priced home in your metro area:

  • Mortgage rate: 3.66 percent
  • Home price: $101,000
  • Salary: $15,860.70

Cleveland is king in terms of affordability. While Cleveland's median-home price has increased by 19 percent over the last year, the median price of $101,000 is still the lowest on our list. Also, with mortgage rates as low as they are, it only takes a salary of $15,860.70 to afford the principal and interest payment on a median-priced home in Cleveland.

Photo by Avogadro94, via Wikimedia Commons.

  • Mortgage rate: 3.64 percent
  • Home price: $111,000
  • Salary: $17,388.16

Despite a dip from the previous quarter, home prices are up by 7 percent in St. Louis since the same time last year. Affordability in the Gateway to the West has actually improved since the last time we ran these calculations, moving from number three to number two on our list.  

Photo by Daniel Schwen, via Wikimedia Commons.

  • Mortgage rate: 3.66 percent
  • Home price: $115,100
  • Salary: $18,074.92

Atlanta remains in the top three in terms of affordability. However, home prices in Atlanta have skyrocketed since 2012, up over 31 percent since the first quarter of last year. Even though mortgage rates have fallen since last time, Atlanta isn’t quite as cheap as it once was.

Photo by Daniel Mayer (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.71 percent
  • Home price: $121,000
  • Salary: $19,118.64

Even though home prices are up and mortgage rates are down in Cincinnati, it continues to require a salary of just under $20,000 to afford the principal and interest on a home here.

Photo by kdh (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.68 percent
  • Home price: $141,800
  • Salary: $22,322.69

Tampa is a Florida metro that has seen price increases over the last couple of years. While down from the second-quarter peak of $144,300, the median-home price in Tampa is 7.5 percent higher than in early 2012.

Photo by Christopher Hollis for Wdwic Pictures, via Wikimedia Commons.

  • Mortgage rate: 3.54 percent
  • Home price: $145,100
  • Salary: $22,450.56

Orlando has gotten a bit more expensive thanks to a yearly home price gain of 16.5 percent. Higher home prices have been offset to a degree thanks to the lowest mortgage rates on our list.

Photo by CaryMelC.

  • Mortgage rate: 3.59 percent
  • Home price: $156,700
  • Salary: $24,395.97

San Antonio jumped up a few spots on our list since August 2012. At that time, mortgage rates averaged 4.07 percent and home prices were $162,800. As you can see, both prices and rates are way down.

Photo by Muhgcee, via Wikimedia Commons.

  • Mortgage rate: 3.59 percent
  • Home price: $160,400
  • Salary: $24,972.01

Much like its sister city San Antonio, median-home prices and mortgage rates are down in Dallas, creating greater levels of affordability.

Photo by fcn80, via Wikimedia Commons.

  • Mortgage rate: 3.77 percent
  • Home price: $159,400
  • Salary: $25,371.99

Chicago has climbed the affordability ladder by four spots since last time thanks to lower mortgage rates and much lower home prices. Whereas the average median home price in Chicago was $175,300 in 2012, first quarter prices averaged $159,400 at the start of 2013.

Photo by Derek Kaczmarczyk, via Wikimedia Commons.

  • Mortgage rate: 3.64 percent
  • Home price: $163,700
  • Salary: $25,643.62

While mortgage rates aren’t the lowest in this Texas metro, conditions for borrowers in Space City remain very affordable, as home prices have increased by 4.5 percent since the same time last year.  

Photo by: Urban, Houston Skyline, via Wikimedia Commons.

  • Mortgage rate: 3.56 percent
  • Home price:  $169,000
  • Salary: $26,213.39

Phoenix is one of the most-improved metros on our list from last time. Home prices have risen by over 30 percent since the first quarter of 2012, and average rates in Phoenix are the second-lowest on our list.

Photo by Azwatchdog (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.67 percent
  • Home price: $170,600
  • Salary: $26,823.46

Median-home prices in Minneapolis have risen by nearly 16 percent since the same time last year. In August 2012, we noted that mortgage rates in Minneapolis were the highest on our list. That’s not the case this time around. At 3.67 percent, mortgage rates in Minneapolis are in the middle of the pack.

Photo by Jdkoenig (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.60 percent
  • Home price: $197,700
  • Salary: $30,817.16

Things have gotten more affordable in the City of Brotherly Love, but it has come at the expense of home prices. While higher than the same time last year, home prices in Philly are more than $20,000 lower than during the second quarter of 2012.

Photo by Bobak Ha'Eri (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.70 percent
  • Home price: $209,300
  • Salary: $33,029.91

Salary requirements have risen appreciably in the River City. Home prices are up nearly 30 percent since the same time last year, and mortgage rates in Sacramento are rather high in terms of the other cities on our list.

Photo by Michael Grindstaff, via Wikimedia Commons.

  • Mortgage rate: 3.72 percent
  • Home price: $219,900
  • Salary: $34,788.05

Why are things more expensive in Miami? Mortgage rates are high and home prices are up nearly 21 percent since early 2012.

Photo by: Daderot (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.61 percent
  • Home price: $226,500
  • Salary: $35,350.11

In terms of year-over-year averages, home prices have been pretty stable in Charm City. Favorable mortgage rates and consistent prices continue to keep Baltimore on the higher end of our list.

Photo by: Chuck Szmurlo, Cszmurlo, via Wikimedia Commons.

  • Mortgage rate: 3.68 percent
  • Home price: $246,500
  • Salary: $38,804.95

Despite hefty price increases since early 2012, lower mortgage rates have kept affordability levels quite balanced in Portland.

Photo by Steve Morgan (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.66 percent
  • Home price: $261,200
  • Salary: $41,017.97

Denver remains in the exact same spot on our last as last time, despite being the first metro to crack the $40,000-salary mark. Median prices are up over 15 percent since the same time last year in the Mile-High City, but the mortgage-rate spread hasn't been as wide as in many other metros.

Photo by Gtj82 (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.70 percent
  • Home price: $312,600
  • Salary: $49,331.82

Here’s where things start getting expensive on our list. From Denver to Seattle, the salary requirement jumps over $8,300. Continued price gains and higher interest rates keep the Emerald City high on our list.

Photo by: Daniel Schwen, via Wikimedia Commons.

  • Mortgage rate: 3.63 percent
  • Home price: $332,200
  • Salary: $51,975

Low inventory levels have kept activity going in Boston for some time now. Home prices are up almost 7 percent since early 2012, but for being such an expensive metro, mortgage rates remain extremely favorable.

Photo by: Nelson48, via Wikimedia Commons.

  • Mortgage rate: 3.65 percent
  • Home price: $345,500
  • Salary: $54,189.36

Massive price gains since last year have kept salary requirements high in the City of Angels. In fact, since we last ran the numbers for this slideshow back in August 2012, the required salary has risen by more than $10,000.

Photo by Myriam Thyes (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.58 percent
  • Home price: $348,700
  • Salary: $54,220.54

The real estate market keeps getting more expensive in Washington, D.C. While mortgage rates are by far the lowest in D.C. than in all the other higher-priced metros on our list, home prices have risen by nearly 12 percent since the first quarter of 2012.

Photo by Kevin McCoy, via Wikimedia Commons.

  • Mortgage rate: 3.65 percent
  • Home price: $368,200
  • Salary: $57,749.70

In a year-over-year comparison, home prices have been quite stable in New York City. High rents and low interest rates continue to drive more New Yorkers to own a home in the Big Apple.

Photo by Daniel Schwen (Own work), via Wikimedia Commons.

  • Mortgage rate: 3.70 percent
  • Home price: $412,300
  • Salary: $65,065.61

Limited inventory continues to be a concern in San Diego, and home prices are proving it. Median-home values are up almost 15 percent since the same time last year. If you’re buying a home in San Diego, be prepared to compete with investors, says Gary Kent, a Realtor in San Diego.

Photo by Norvy, via Wikimedia Commons.

  • Mortgage rate: 4.01 percent
  • Home price: $593,900
  • Salary: $97,330.11

Owning a home in San Francisco continues to be just a dream for many. The most expensive metro on our list plays host to the highest home prices and the highest mortgage rates.

Photo by Urban, via Wikimedia Commons.

To find out, HSH.com took the National Association of Realtors’ 2013 first quarter data for median-home prices as well as our 2013 first quarter average interest rates for 30-year, fixed-rate mortgages and plugged them into our mortgage calculator to decipher the principal and interest payment needed to  purchase a median-priced home with a 20 percent down payment in 25 major metropolitan areas.

We determined the after-tax income required to cover only the mortgage's principal and interest payment. We used standard 28 percent "front-end" debt ratios and a 20 percent down payment subtracted from the median-home-price data to arrive at our figures.

There is no doubt that your income will need to be much higher, possibly even double or triple these levels to cover the needed taxes, insurances and other expenses to live in the home, plus any other debts you might have. Since those are highly variable, down to even the individual property level and personal choice, there is no adequate way to factor for them.

That's where you come in. We've given you the basic, bottom line income you need to cover the mortgage; to this, add the annual cost of taxes and insurance to arrive at a realistic cost to obtain a home in your chosen city. Depending upon where you are, these can add up to as much as the mortgage payment itself, or more!

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About the author:

TMTim Manni is the Managing Editor of HSH.com and the author of the site's daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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