The Income Group You Need to Be in to Buy a Home Across the US


Looking to buy a home in one of the major housing markets in the US? In the nation’s priciest urban centres, you’ll need an income among the top 20 – 30% range of household earners in order to afford a median-priced home, according to new numbers compiled by Zoocasa.

The study crunches how much income a household would need to have to qualify for a mortgage on the median-priced home in 35 US cities, assuming they’re making a 20% down payment, have a mortgage rate of 4.5%, and are paying their mortgage off over a 30-year timeline. These affordability findings were then cross-referenced with household income data as reported by the United States Census Bureau to determine what income group buyers would need to fall into in order to afford local real estate. Median home prices were sourced from Realtor.com. Other expenses, such as taxes, insurance, heating, and debt repayment, were not factored into the calculation.

The findings reveal that affordability is most widespread in cities located in the Midwest and Southern states, with the majority of households needing to be among only the top 60 – 80% of income earners to afford a median-priced home. This reflects that local incomes remain well-aligned with real estate prices in these cities, signalling overall affordable market conditions.

Related Read: The Income Group You Need to Be In to Buy a Home in These Canadian Cities

Detroit, Columbus, and Oklahoma City Most Affordable for Majority of Home Buyers

The top three most financially accessible housing markets in the US have median-priced homes that are affordable to 80% of their populations; they include Detroit, MI, where a median-priced home of $85,000 could be purchased with an income of $14,772, Columbus, OH, with a home price of $157,000, requiring an income of $27,276, and Oklahoma City, OK, where a $170,000 home could be purchased with an income of $29,544.

Median-priced homes in the following cities were also affordable for the top 70% of households:

  • Kansas City, MO – Home Price: $189,900, Required Income: $33,000
  • Indianapolis, IN – Home Price; $162,000, Required Income: $28,152
  • Milwaukee, WI – Home Price: $160,000, Required Income: $27,804
  • Virginia Beach, VA – Home Price: $282,000, Required Income: $48,996
  • Charlotte, NC – Home Price: $263,500, Required Income: $45,780
  • Jacksonville, FL – Home Price: $210,000, Required Income: $36,492
  • Baltimore, MD – Home Price: $187,000, Required Income: $32,496

San Francisco, Los Angeles, San Jose Affordable Only to Top 20 – 30%

Not surprisingly, the steepest affordability can be found clustered in Californian markets, as well as in parts of the Northeast.

The most financially inaccessible cities for real estate are San Francisco and Los Angeles, CA – in the tech hub, the median home price has hit a whopping $1,418,500, requiring buyers to be within the upper 20% echelon of earners with an income of $246,432. LA buyers will need to earn $147,672 to able to afford a median home price of $850,000.

Affordability is nearly as steep in San Jose, CA, where homes cost a median of $1,020,000, requiring an income of $177,204, and Boston, MA, with a $679,950 price tag and income requirement of $118,18.

Check out the infographic below to see what income group a household must be in to afford the median-priced home in cities across the United States:

US Income Group Threshold Values

For reference, the table below shows the threshold values for household income groups. The threshold value is the minimum income needed to be in each income group. Income groups and threshold values were sourced from the United States Census Bureau. All figures are in US dollars.

Methodology:

Household income figures and income group thresholds were sourced from the United States Census Bureau.

Median home prices are for April 2019 and were sourced from realtor.com on June 7, 2019. The median sold price was used except for Albuquerque, Austin, Dallas, Houston, Kansas City, Nashville, Newark, Oklahoma City, Phoenix, Salt Lake City, and Virginia Beach where only the median list price was available.

The annual income required to afford the median home in each US city was based on the city’s home price, a down payment of 20%, and a mortgage with a loan term of 30 years and an interest rate of 4.5%. Taxes, insurance, heating and other expenses or debts were not factored into the calculation. Calculations were based on Bankrate’s affordability calculator at www.bankrate.com/calculators/mortgages/new-house-calculator.aspx.

All dollar figures are in US dollars.

About Zoocasa

Zoocasa.com is a real estate website that provides advanced online search tools and data to empower Canadians to buy or sell their homes faster, easier and more successfully. Home buyers can browse real estate listings on the website or the free iOS app.

For more information about this report or to set up a media interview, please email [email protected]

About Penelope Graham

Penelope Graham is the Managing Editor at Zoocasa. A born-and-bred Torontonian and quintessential millennial, she has over a decade of experience covering real estate, lifestyle and personal finance topics. When not keeping an eye on Toronto's hot housing market, she can be found brunching in one of the city's many vibrant neighbourhoods.