There may be no better time than now to buy a home, with mortgage rates scraping 2014 lows and recent home affordability by region data looking very promising.
This month, HSH.com, the nation’s largest mortgage information company, released its study of the salary needed to buy a home in 27 metro areas of the United States. Using the National Association of Realtors’ second-quarter 2014 data for median-priced homes, HSH.com determined that Pittsburgh was the most affordable place to call home, where you need $33,128.20 in salary to afford a $139,900 median-priced house with a combined monthly principal, interest, taxes and insurance (PITI) payment of $772.99.
By contrast, the most expensive metro area to buy in was perennial leader, San Francisco, where you need $150,511.88 in annual salary to buy a median-priced home of $769,600 for a monthly PITI payment of $3,511.94. Nationally, a median-priced home in July was $222,900.
So, whether you can afford your own home depends a lot on where you live. That said, this is a big country, with lots of options.
Focusing on 5 metro areas
For its part, MyBankTracker wanted to take a more granular view of this home affordability by region study and compare HSH.com’s data from five of the metro areas in the survey (Atlanta, Philadelphia, San Diego, Seattle and St. Louis, selected for their regional representation of the South, the Northeast, the West and the Midwest) against the Census Bureau’s Median Family Income report from April 2014.
The analysis was revealing, especially when comparing HSH.com’s metro data with the Census Bureau’s state median income for a family of four, because with just one exception (San Diego), a family of four pooling their resources could afford to buy a home.
Furthermore, we talked to real estate agents in these metro areas to gain a street-level view of these various markets. Here’s what we turned up:
The Big Peach is an extremely consumer-friendly city in which to buy a home. HSH.com data show that a yearly salary of $38,005.28 will buy a median-priced home of $166,200. Homeownership is clearly in reach because a one-earner family in Georgia brings home $41,266. For a family of four, median income jumps to $69,082.
Al Hunter, a real estate agent with Better Homes and Garden’s MetroBrokers office in Atlanta, said jobs are becoming more plentiful — in banking, the medical field and government, in particular — and home shoppers are smarter.
“Buyers are all Internet-savvy now,” Hunter said. “They’re better educated about the buying process and what they can afford and they’ve learned from their mistakes in the past. As a result, we’re seeing a new wave of buyers who are feeling better about the economy, whether it’s buying a house or a car. They’re cautious but they’re game. If they’re making $50,000 a year without too many write-offs, I can absolutely find them a home.”
Interestingly, some 15 miles south of downtown Atlanta is Clayton County, which is where Margaret Mitchell placed the Scarlett O’Hara family plantation in her 1936 novel, “Gone with the Wind.” According to RealtyTrac, an Irvine, Calif., real estate information company, a three-bedroom home in Clayton sells for a median $50,800. See the our mortgage calculator to compute your payments for a $45,000 or $50,000 loan!
The City of Brotherly Love is not as affordable as low-ball leader, Pittsburgh, but Philadelphia is the undisputed cultural and historical leader, famous for giving us the U.S. Constitution and serving as the long-time home of Benjamin Franklin. But as for home affordability, it’s doable. To own here, you’ll need a salary of $54,323.02 for a median-priced home of $227,200. A one-earner household brings home $47,809, not the $54,323.02 needed, but a household of four earners makes $83,162, comfortably making it possible for a family to buy.
“Philadelphia is very affordable,” said Century 21 real estate agent Marie Perry. “We have housing for people earning $30,000 a year and for people earning $1 million a year. Our Center City has been reborn. A lot of people are coming here from New York and Connecticut. Then there are those whose children go to university here. After they drop them off, they fall in love with the place and buy here. Philadelphia has come a long way. Construction is taking place everywhere. The streets are clean and tree-lined, it’s just a lovely place to live.”
San Diego is our bad boy on the block, where a $100,091.70 annual salary is needed to purchase a $504,200 home. Household income of one ($48,498) or four ($76,211) won’t get you to the Promised Land.
San Diego is a hang out for high-income earners, and there appear to be plenty of them, according to a real estate agent whom MyBankTracker interviewed, but asked not to be identified.
“The labor market is strong, with bio-tech and engineering leading the way, and because of the competition for talent, salaries easily rise into the six figures,” the agent said. “We also work with a lot of great lenders who are very good at coming up with creative financing solutions.”
But there seem to be few financial solutions or places to live in San Diego for people drawing minimum wage.
“We know it costs a lot to live here, and people sacrifice to live here, but it’s worth it” the agent said. “It’s 75 degrees every day. We’re playing in the sand, not in snowdrifts like they do in the East.”
Also on the West Coast, Seattle is a location slightly kinder to wage earners than San Diego. To purchase a median-priced $357,400 home in Seattle requires $74,674.89 in annual salary. A one-earner household won’t cut it at $53,772 a year, but a four-person household earns $86,215, so a family that pitches in financially in Seattle can exceed the affordability bar.
“I see few financial barriers or issues facing my buyers,” said Seattle-based real estate agent, Jay Oguado. “The average salary is $75,000, but it seems most of my clients are in the $75,000 to $100,000 range. And if you figure a bank will make a loan at about four times salary, you should be able to purchase.”
Many of Oguado’s clients work as engineers and marketers for techie giants like Microsoft, Google and Amazon.
“I don’t see a lot of people struggling,” Oguado said. “There are ample jobs.
“The greater challenge is tight inventory, a trend we see increasing through 2017, which will only increase the pressure on prices.”
St. Louis might be known as the “Gateway to the West,” but it could just as easily be known as the “Gateway to Home Affordability.” To purchase a median-priced $149,900 home requires an annual salary of $36,020.47. Single-household income is $48,498. A four-member household in the state earns $73,288.
“I’d say the median housing price is closer to $160,000,” said real estate agent Allen Brake. “It’s very affordable to live here. Even though we don’t make as much money as people on the coasts, we make what we earn go a long way.”
Brake added that in certain areas of the St. Louis metroplex, it’s become cheaper to buy than rent. That edge might not last for long, as prices have returned to their pre-crash levels, with locations in the better school districts seeing the strongest appreciation.
“But if you’re asking me, can I get you into a good house for under $200,000, my answer is ‘absolutely,’” he said.
Although home affordability declined in the second quarter of 2014, meaning wages lagged behind climbing housing prices, home purchases remain within reach, in all but a few cities, for the majority of Americans.
While single-earner households may feel strained and limited in their housing options, larger households with multiple wage-earners are pooling their resources to buy.