Interest rates, housing markets, community and school ratings, and crime statistics are only a few of the factors that may weigh into a person’s decision regarding where to live. Owning a home has long been associated with success, stability, and a strong work ethic. An investment in your future, purchasing a home is one of your most significant financial decisions. It’s a decision nearly two out of every three Americans have made in recent years. Slightly over one-quarter of people choose to the obvious alternative: renting.
While finding the right home that will earn you a decent return on your investment is essential, perhaps even more critical is the need to find a home you can afford. This is something members of the middle class have had trouble with over the past several years. Zillow reports the median list price on U.S. homes at slightly over $211,000, which produces a monthly mortgage payment of $1,000 or so before property taxes, insurance, or any PMI. It costs around $1,350 a month to rent a typical home in the U.S. these days.
With the median household income currently at under $55,000, this level of mortgage payment is quasi-affordable most middle class workers, but taking on higher amounts can be a real stretch. And we all know that in many areas of the country, homes are much more expensive.
HSH recently published a report on the annual salary required to purchase a home in 27 different metropolitan areas. Based on this report and other supplemental income data from the Census Bureau and rental pricing data from Zillow, we created a list of places where a middle class worker cannot afford to live comfortably and buy or rent a home. You may be surprised to see some of the places that are out of reach.
Cities where the middle class cannot afford median-priced homes
To buy a home in these cities, you’d need a salary that’s significantly higher than the national median household income — and between roughly $9,000 and $70,000 higher than the median income within the city itself. Renting will cost you an arm and a leg in these places, as well.
- San Francisco — For a median-priced home, you’d need a salary of $145,361, much higher than the San Francisco median household income of $75,604. Your typical monthly payment on a home would be $3,392. To rent in San Fran, you’d be looking at close to $4,000 per month, which is completely out of reach for a middle earner.
- San Diego — For a median-priced home, you’d need a salary of $101,683, which is again much higher than the San Diego median household income of $62,962. Your typical monthly payment on a home would be $2,373. For a rental in San Diego, you’re going to pay close to $2,100 for a mid-priced property.
- Los Angeles — In LA, you’d need to earn $96,514 to buy a median-priced home with a monthly payment of $2,252. This would be kind of tough considering the median household income in LA is under $60,000. Thinking about renting instead? You’ll be looking at a median price of around $2,500.
- New York City — For a mid-priced home, you’d need a salary of over $92,000, which is quite a bit more than the NY county median household income of around $70,000. Your typical monthly payment on a home would be $2,153 and to rent here, you’d be looking at around a $2,200 payment.
- Boston — To buy a typical home here, you’d need to earn $84,476, and pay a monthly payment of $1,971. If you want to rent, you’re looking at a payment of around $2,500. This is in spite of the less than $55,000 median income in the Boston area.
- Washington — Want to buy in Washington D.C.? If you earn $82,000 a year, you most certainly can afford a median-priced home with a payment of around $1,910 per month (renters are looking at around $2,500 per month). If you can afford this, you’re better off than typical middle earners, as the median income in D.C. is less than $66,000.
- Seattle — Seattle doesn’t sound too expensive, right? Well, you need a salary of just over $75,000 to afford a mid-priced home here. You’re payments as a homeowner would be around $1,750 and as a renter, you’re looking at payments of around $2,200. Unfortunately, middle earners here earn slightly less than the salary needed, as the median income is just over $65,000 in the Seattle area.
- Denver — To buy in Denver, you need to earn a little over $63,000 per year if you want a median-priced home. This doesn’t sound too bad, expect for the median income in Denver is over $10,000 less — at $50,313. Your monthly payments on a Denver home would be around $1,470 and to rent, you’re going to pay around $1,775.
- Portland — To buy in Portland at the median price point, you should ideally earn around $62,000. But, median incomes in Portland are around $10k less — at $52,657. You’re going to shell out around $1,450 for a mortgage payment in Portland or around $1,600 for a rent payment.
These are not the only cities where middle class workers have trouble affording housing. In Sacramento, for instance, you need a salary of slightly over $60,000 to buy a mid-level home, but the median income in the area is only around $55,000. Homes are too expensive for middle earners in Miami, Chicago, and several other cities across the country.
Then in some of the cities where homes are more inexpensive, like Pittsburgh and several cities in Tennessee, median incomes are also lower. So although housing prices are lower, middle class workers earn less money in those areas. In Pittsburgh, for instance, you need an annual salary of around $32,500 to buy a median-priced home. But, in that area, the median income is also more than $10,000 less than the national median. The key is finding the proper balance.
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