Homeownership costs continue to squeeze out all but the richest buyers, and potential homeowners now need to earn $200,000 or more in eight U.S. cities to afford a typical home, a new study found.
U.S. mortgage payments are up by an average of 45.6% in the last year. And with interest rates for 30-year fixed-rate mortgages hovering near 7%, homebuyers need to spend more just to keep up with rising financing costs, according to a new analysis by real estate platform Redfin.
On average, a homebuyer in the U.S. must earn $107,281 to afford a median monthly mortgage payment of $2,682, which is up from $73,668 a year ago, as of October, Redfin finds.
But homeownership costs also vary widely by market, with many cities requiring much more income to afford the monthly mortgage payments for a typical home. Out of the largest 100 metro areas in the U.S., these eight markets ranked as the least affordable, based on income needs.
1. San Francisco
Median home price: $1,497,000
Income needed to afford a median-priced home: $402,821
2. San Jose, California
Median home price: $1,350,000
Income needed to afford a median-priced home: $363,265
3. Anaheim, California
Median home price: $945,000
Income needed to afford a median-priced home: $254,286
4. Oakland, California
Median home price: $920,000
Income needed to afford a median-priced home: $247,559
5. Los Angeles
Median home price: $823,500
Income needed to afford a median-priced home: $221,592
6. San Diego
Median home price: $790,000
Income needed to afford a median-priced home: $212,577
7. Oxnard, California
Median home price: $782,500
Income needed to afford a median-priced home: $210,559
8. Seattle
Median home price: $763,000
Income needed to afford a median-priced home: $205,312
With a chronic housing shortage and some of the wealthiest residents in the U.S., California contains many of the most expensive markets to buy a typical home, with seven requiring earnings of $200,000 or more.
New York City wasn’t far behind on the list, ranking 11th overall. To afford a median-priced home in the Big Apple, you’d need an income of $178,942 to keep up with payments.
For the purposes of the study, mortgage payment affordability assumes that a given homebuyer spends no more than 30% of their income on housing — a common rule of thumb for budgeting expenses.
Median home prices are based on Redfin sales data between October 2021 and October 2022, and median mortgage payments assume the buyer made a 5% down payment. Mortgage rates are based on the average rates for October 2021 and October 2022, which are 3.1% and 6.9%, respectively.
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