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The salary you must earn to buy a home in 27 metros

How much salary do you need to earn in order to afford the principal, interest, taxes and insurance payments on a median-priced home in your metro area?

Cleveland Pittsburgh St. Louis Cincinnati Detroit Atlanta Tampa Phoenix Orlando San Antonio Minneapolis Dallas Houston Philadelphia Chicago Baltimore Sacramento Miami Denver Portland Seattle Washington Boston Los Angeles New York City San Diego San Francisco

 

Chicago

How much salary do you need to earn in order to afford the principal and interest payments on a median-priced home in your metro area?

To find out, HSH.com took the National Association of Realtors’ fourth-quarter data for median-home prices and HSH.com’s fourth-quarter average interest rate for 30-year, fixed-rate mortgages to determine how much of your salary it would take to afford the base cost of owning a home -- the principal, interest, taxes and insurance -- in 27 metro areas.

We used standard 28 percent "front-end" debt ratios and a 20 percent down payment subtracted from the NAR’s median-home-price data to arrive at our figures. We've incorporated available information on property taxes and homeowner’s insurance costs to more accurately reflect the income needed in a given market. Read more about the methodology and inputs on the final slide of this slideshow.

The theme during the fourth quarter was increased affordability.

Home prices declined from the third to the fourth quarter in all of the metro areas on our list but one. But on a year-over-year basis, home prices have continued to trend upward.

“Home prices in metro areas throughout the country continue to show solid price growth, up 25 percent over the past three years on average,” said Lawrence Yun, NAR chief economist.

Along with affordable home prices, mortgage rates fell across the board which caused the required salaries for our metro areas to decline (again, except for one).

“Low interest rates helped preserve affordability last quarter, but it’ll take stronger income gains and more housing supply to help meet the pent-up demand for buying,” said Yun.

On a national scale, with 20 percent down, a buyer would need to earn a salary of $48,603.82 to afford the median-priced home. However, it’s possible to buy a home with less than a 20 percent down payment. Of course, the larger loan amount when financing 90 percent of the property price, plus the need for Private Mortgage Insurance (PMI), raises the income needed considerably. In the national example above, a purchase of a median-priced home with only 10 percent down (and including the cost of PMI) increases the income needed to $56,140.44 – just over $7,500 more.

Here’s a current look at how much salary you would need to earn in order to afford the principal, interest, taxes and insurance payments on a median-priced home in your metro area.

Mortgage rate: 3.98 percent

  • Quarterly change: -0.14 percent

Home price: $135,000

  • Quarterly change: -6.90 percent
  • YOY change: +4.98 percent

Monthly payment: $740.05

Salary: $31,716.32

  • Quarterly change: -$2,035.40

The Pittsburgh metro remains on top in terms of affordability for the third quarter in a row. The Steel City tied Washington, D.C. for the lowest mortgage rates on our list. Combine that with a steep decline in quarterly prices, and affordability conditions continue to improve to the tune of a required salary of just $31,716. (We thank RealSTATs for providing us with the Pittsburgh metro home-price data.)

Mortgage rate: 4.05 percent

  • Quarterly change: -0.18 percent

Home price: $121,200

  • Quarterly change: -6.70 percent
  • YOY change: +7.45 percent

Monthly payment: $746.91

Salary: $32,010.41

  • Quarterly change: -$1,898.86

Unfortunately, the quarterly price growth we celebrated last quarter evaporated thanks to a 6.70-percent decline in the fourth quarter. The good news is that homebuyers will not be required to earn as much to purchase a median-priced home in the Cleveland metro.

Mortgage rate: 4.03 percent

  • Quarterly change: -4.03 percent

Home price: $138,400

  • Quarterly change: -7.86 percent
  • YOY change: +6.22 percent

Monthly payment: $777.54

Salary: $33,323.09

  • Quarterly change: -$2,476.87

The St. Louis metro area moved from the fifth spot on our list last quarter to No. 3 this time around. Substantial quarterly declines in mortgage rates and home prices caused the required salary for St.-Louis-area homebuyers to fall by nearly $2,500.

Mortgage rate: 4.09 percent

  • Quarterly change: -0.16 percent

Home price: $138,100

  • Quarterly change: -7.32 percent
  • YOY change: +7.30 percent

Monthly payment: $781.32

Salary: $33,485.23

  • Quarterly change: -$2,279.81

While the Cincinnati metro holds the fourth spot on our list, there really isn’t much difference between the Cincinnati and St. Louis metros: mortgage rates, home prices, quarterly and yearly price changes and the required salary are nearly identical.

Mortgage rate: 4.18 percent

  • Quarterly change: -0.16 percent

Home price: $135,800

  • Quarterly change: -10.36 percent
  • YOY change: +10.69 percent

Monthly payment: $828.83

Salary: $35,521.47

  • Quarterly change: -$3,112.86

The Detroit metro swapped places with St. Louis on our list for the fourth quarter. The fourth-quarter decline in Detroit’s home prices matched the YOY gains the metro area has accumulated. The highest mortgage rates on the list so far were tamed by the 10.36-percent quarterly price decline, the second-largest decline among our entire list. (We thank Realcomp for providing us with the Detroit metro home-price data.)

Mortgage rate: 4.09 percent

  • Quarterly change: -0.14 percent

Home price: $157,700

  • Quarterly change: -5.85 percent
  • YOY change: +10.74 percent

Monthly payment: $835.34

Salary: $35,800.11

  • Quarterly change: -$2,089.72

While the Atlanta metro’s strong year-over-year price gains continue, quarterly price gains have lagged (except for the 17-percent increase during the second quarter). Price and interest rate declines continue to add to the Atlanta metro’s affordability.

Mortgage rate: 4.13 percent

  • Quarterly change: -0.17 percent

Home price: $160,000

  • Quarterly change: +10.34 percent 
  • YOY change: +12.36 percent

Monthly payment: $880.42

Salary: $37,732.20

  • Quarterly change: +$2,000.26

The Tampa metro area is the one outlier this time around. The Tampa metro is the only area on our fourth-quarter list to see a quarterly-home-price increase, and a strong increase at that. The quarterly and YOY gains completely canceled out the metro’s declines from last quarter. The result is the only metro area on our list to see a required-salary increase.

Mortgage rate: 4.06 percent

  • Quarterly change: -0.17 percent

Home price: $200,300

  • Quarterly change: -0.10 percent 
  • YOY change: +3.94 percent

Monthly payment: $948.69

Salary: $40,658.08

  • Quarterly change: -$712.77

The Phoenix metro area is the eighth most-affordable metro on our list yet again. Affordability conditions haven’t changed much in the Phoenix area. A salary increase of just $120 last quarter and a decline of $713 in the fourth quarter (the second-smallest decline on our list) are some of the smallest fluctuations in affordability we have seen.

Mortgage rate: 4.07 percent

  • Quarterly change: -0.13 percent

Home price: $180,000

  • Quarterly change: No change
  • YOY change: +8.56 percent

Monthly payment: $983.34

Salary: $42,143.30

  • Quarterly change: -$466.41

Like Phoenix, the Orlando metro experienced very little salary change in the fourth quarter. In fact, the Orlando area had the smallest salary change of any metro on our list. No change in home prices and the 0.13-percent decline in interest rates took the required salary down just $466.

Mortgage rate: 4.09 percent

  • Quarterly change: -0.19 percent

Home price: $185,500

  • Quarterly change: -0.48 percent 
  • YOY change: +8.04 percent

Monthly payment: $1,058.73

Salary: $45,374.30

  • Quarterly change: -$856.99

Still the most affordable Texas metro on our list, San Antonio is the first area to see monthly payments crest the $1,000 mark. Practically no change in quarterly home prices and a rate decline of 0.19 percent sent affordability conditions in the right direction for San-Antonio-area homebuyers.

Mortgage rate: 4.07 percent

  • Quarterly change: -0.18 percent

Home price: $210,000

  • Quarterly change: -4.15 percent
  • YOY change: +6.54 percent

Monthly payment: $1,111.29

Salary: $47,626.53

  • Quarterly change: -$2,289.43

As before, Minneapolis is the first metro area on our list to crack the $200,000-home-price mark. With both mortgage rates and home prices on the decline during the fourth quarter, the Twin Cities metro more than overcame the $660 salary increase they experienced during the third quarter. 

Mortgage rate: 4.09 percent

  • Quarterly change: -0.22 percent

Home price: $189,600

  • Quarterly change: -2.02 percent 
  • YOY change: +9.03 percent

Monthly payment: $1,138.35

Salary: $48,786.53

  • Quarterly change: -$1,497.20

The required salary in the Dallas metro finally stopped increasing after rising for three straight quarters in 2014. Dallas tied with Washington D.C. for the largest quarterly decline in mortgage rates. 

Mortgage rate: 4.09 percent

  • Quarterly change: -0.17 percent

Home price: $199,300

  • Quarterly change: -1.58 percent 
  • YOY change: +9.33 percent

Monthly payment: $1,166.28

Salary: $49,983.37

  • Quarterly change: -$1,217.33

Quarterly price declines continued in Houston, but it remains the most expensive Texas metro on our list. Yearly price growth in the Houston metro continues to lead the pack among the Texas three. Last quarter, Houston Realtors reported that home prices were returning to more normalized levels. The same trend seemed to hold true during the fourth quarter as well.

Mortgage rate: 4.14 percent

  • Quarterly change: -0.15 percent

Home price: $213,300

  • Quarterly change: -7.78 percent
  • YOY change: -0.47 percent

Monthly payment: $1,187.99

Salary: $50,914.04

  • Quarterly change: -$3,691.28

Philadelphia is one of two metro areas on our list that experienced both quarterly and yearly price declines.  The City of Brotherly Love is also the first metro to crack the $50,000-salary mark.

Mortgage rate: 4.03 percent

  • Quarterly change: -0.16 percent

Home price: $233,200

  • Quarterly change: -8.84 percent
  • YOY change: -3.52 percent

Monthly payment: $1,228.78

Salary: $52,661.96

  • Quarterly change: -$4,527.22

Speaking of two metro areas that saw both quarterly and yearly price declines, Baltimore is the second. What we wrote last quarter about Baltimore-area prices still holds true: “Home prices seem to be working in favor of buyers rather than sellers in the Baltimore metro area.”  Affordability is way up, as the Baltimore metro's required salary is the first on our list to decline by over $4,000.

Mortgage rate: 4.09 percent

  • Quarterly change: -0.12 percent

Home price: $195,100

  • Quarterly change: -12.04 percent 
  • YOY change: +4.28 percent

Monthly payment: $1,268.09

Salary: $54,346.62

  • Quarterly change: -$4,949.02

Last time, the Chicago area had the largest quarterly mortgage-rate decline of all the metros on our list. This time, the Chi-town metro had the largest quarterly price decline on our list. What had the bigger impact on affordability? Clearly home prices made the bigger difference, as the required salary in the Chicago area declined by nearly $5,000 during the fourth quarter, compared with just $20 during the third.

Mortgage rate: 4.19 percent

  • Quarterly change: -0.14 percent

Home price: $268,700

  • Quarterly change: -2.40 percent
  • YOY change: +7.33 percent

Monthly payment: $1,362.96

Salary: $58,412.49

  • Quarterly change: -$1,879.33

It seems every quarter Sacramento and Miami are trading places on our list. Given how similar the home prices are, it’s no surprise. Even though the Sacramento metro area has the second-highest mortgage rates on our list, its quarterly price decline was just enough to make it more affordable this time around.

Mortgage rate: 4.09 percent

  • Quarterly change: -0.17 percent

Home price: $265,000

  • Quarterly change: -1.85 percent
  • YOY change: +3.96 percent

Monthly payment: $1,363.40

Salary: $58,431.48

  • Quarterly change: -$1,744.46

Home prices in the Miami metro continue to hold in a relatively stable pattern: slight declines (or no changes at all) in the quarterly numbers, and modest YOY growth. Mortgage rates continued to decline, allowing the required salary to buy a median-priced home in the Miami area to fall by over $1,700.

Mortgage rate: 4.11 percent

  • Quarterly change: -0.17 percent

Home price: $288,900

  • Quarterly change: -0.82 percent 
  • YOY change: +8.00 percent

Monthly payment: $1,414.08

Salary: $60,603.50

  • Quarterly change: -$1,388.75

While quarterly price growth stalled in the Portland metro, yearly price growth grew during the fourth quarter. Add lower mortgage rates to falling quarterly home prices, no matter how small the decline is, and the result -- every time -- is increased affordability.

Mortgage rate: 4.08 percent

  • Quarterly change: -0.20 percent

Home price: $314,800

  • Quarterly change: -0.22 percent
  • YOY change: +12.71 percent

Monthly payment: $1,438.32

Salary: $61,642.15

  • Quarterly change: -$1,376.85

Housing conditions continue to grow more affordable in the Denver area. While YOY price gains in the Denver metro are the highest on our fourth-quarter list, quarterly growth is flat. A substantial decline in interest rates added to the purchasing power of buyers in the Denver metro.

Mortgage rate: 4.15 percent

  • Quarterly change: -0.13 percent

Home price: $352,000

  • Quarterly change: -2.20 percent
  • YOY change: +2.21 percent

Monthly payment: $1,699.70

Salary: $72,844.31

  • Quarterly change: -$2,253.76

Last quarter, Seattle saw no change in the interest rate and virtually no change in home prices. Not so for the fourth quarter. Declines in both rates and prices brought down the required salary to purchase a median-priced home in the Seattle metro by $2,254.

Mortgage rate: 3.98 percent

  • Quarterly change: -0.22 percent

Home price: $372,800

  • Quarterly change: -4.19 percent
  • YOY change: +1.30 percent

Monthly payment: $1,805.88

Salary: $77,394.82

  • Quarterly change: -$4,363.11

Home prices in the D.C. metro area have remained quite consistent during the last few years, especially during some of the country’s more turbulent economic times. Yet, last quarter the D.C. metro area experienced the second-highest salary decline on our list, and during the fourth quarter, additional home-price declines have lowered the required salary even more. Add in the fact that the D.C. metro is tied with Dallas as having the lowest mortgage rates on our list and affordability here is way up.

Mortgage rate: 4.05 percent

  • Quarterly change: -0.21 percent

Home price: $383,200

  • Quarterly change: -4.18 percent
  • YOY change: +3.20 percent

Monthly payment: $1,867.83

Salary: $80,049.93

  • Quarterly change: -$4,425.97

The Boston and D.C. metro areas continue to be closely aligned in terms of affordability conditions. While the mortgage rate, quarterly home price and required-salary declines are nearly identical between the two metros, you must earn about $3,000 more annually to afford the median-priced home in the Boston metro versus D.C.

Mortgage rate: 4.22 percent

  • Quarterly change: -0.15 percent

Home price: $390,000

  • Quarterly change: -5.34 percent
  • YOY change: +0.96 percent

Monthly payment: $2,042.50

Salary: $87,535.60

  • Quarterly change: -$4,941.14

At this point on our list, even moderate prices declines have a larger impact on a buyer’s required salary because prices are so high to begin with. While the Big Apple metro has the highest mortgage rate on our list, the metro still experienced a required-salary reduction of nearly $5,000.

Mortgage rate: 4.07 percent

  • Quarterly change: -0.18 percent

Home price: $450,900

  • Quarterly change: -6.43 percent
  • YOY change: +6.57 percent

Monthly payment: $2,092.18

Salary: $89,664.86

  • Quarterly change: -$6,848.80

While home prices in the LA metro increased nearly 15 percent between the second and third quarter of 2014, that trend made a sharp U-turn by the time the fourth quarter concluded. Combine with a stiff rate decline, the LA area saw the required salary figure fall by the largest amount in the fourth quarter, nearly $7,000.

Mortgage rate: 4.07 percent

  • Quarterly change: -0.21 percent

Home price: $493,100

  • Quarterly change: -4.77 percent
  • YOY change: +3.42 percent

Monthly payment: $2,226.76

Salary: $95,432.68

  • Quarterly change: -$6,249.92

San Diego retains its title as the second-most-expensive California metro on our list and the second-most-expensive metro (overall) on our list. There is just too much of a home-price gap between LA and SD to dethrone the San Diego metro. That said, homebuyers in the San Diego metro received a much needed improvement in affordability during the final three months of 2014.

Mortgage rate: 4.02 percent (jumbo rate)

  • Quarterly change: -0.18 percent

Home price: $742,900

  • Quarterly change: -0.20 percent
  • YOY change: +8.86 percent

Monthly payment: $3,323.79

Salary: $142,448.33

  • Quarterly change: -$2,912.72

San Francisco remains the king of inaffordability because of its home prices. The home-price gap between the San Francisco metro and the San Diego metro is nearly $250,000 and a whopping $607,900 compared with our most affordable metro. Sure, falling rates and stable home prices helped the region this quarter, but you still need to earn over $142,000 just to afford a median-priced property in the area. Remember, in the city itself, a one bed-room condo can easily run you upwards of $900,000.

To compile these results, HSH.com calculated the annual before-tax income required to cover the mortgage's principal, interest, tax and insurance 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. Loans with less than a 20 percent down payment will incur mortgage insurance, which would in turn increase the required salary.

We utilized the NAR’s 2014 fourth-quarter data for median home prices and our 2014 fourth-quarter average interest rate for a 30-year, fixed-rate mortgage to determine how much money homebuyers in 27 major metro areas would need to earn in order to purchase the median-priced home in their market.

The average mortgage rate information we used was for purchase-money mortgages made to borrowers with good to excellent credit.

We created metropolitan-area average property tax information using data made available from the Tax Foundation (http://www.taxfoundation.org), a non-partisan research think tank, based in Washington, D.C.

We used statewide average homeowner insurance premium costs from the Insurance Information Institute (http://www.iii.org), whose mission is to improve public understanding of insurance.

Note: Property taxes and insurance costs are specific to an individual property itself and will be different for any single property in which you may have an interest. Also, if other personal debts exceed 8 percent of one’s given monthly gross income, this will increase the salary needed to qualify.

Data for the Pittsburgh metro area was provided by RealSTATs, a locally owned and operated real estate information company. Home-price data for Detroit was provided by Realcomp II Ltd., Michigan’s largest Multiple Listing Service.

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FHA 15 Yr. - Purchase Rates from Our Lenders in Virginia

Lenders
Rate
APR
Monthly Payment
Gateway Bank
2.750%
2.816%
$1,357
Last Updates: 03/6/2015 See More Rates
 
Cities 30-Year Fixed Mortgage Rate % Change from 3Q14 Median Home Price % Change from 3Q14 Monthly Payment (PITI) Salary Needed
Pittsburgh 3.98% -0.14% $135,000 -6.90 $740.05 $31,716.32
Cleveland 4.05% -0.18% $121,200 -6.70 $746.91 $32,010.41
St Louis 4.03% -0.18% $138,400 -7.86 $777.54 $33,323.09
Cincinnati 4.09% -0.16% $138,100 -7.32 $781.32 $33,485.23
Detroit 4.18% -0.16% $135,800 -10.36 $828.83 $35,521.47
Atlanta 4.09% -0.14% $157,700 -5.85 $835.34 $35,800.11
Tampa 4.13% -0.17% $160,000 +10.34 $880.42 $37,732.20
Phoenix 4.06% -0.17% $200,300 -0.10 $948.69 $40,658.08
Orlando 4.07% -0.13% $180,000 +0.00 $983.34 $42,143.30
San Antonio 4.09% -0.19% $185,500 -0.48 $1,058.73 $45,374.30
Minneapolis 4.07% -0.18% $210,000 -4.15 $1,111.29 $47,626.53
Dallas 4.09% -0.22% $189,600 -2.02 $1,138.35 $48,786.53
Houston 4.09% -0.17% $199,300 -1.58 $1,166.28 $49,983.37
Philadelphia 4.14% -0.15% $213,300 -7.78 $1,187.99 $50,914.04
Baltimore 4.03% -0.16% $233,200 -8.84 $1,228.78 $52,661.96
Chicago 4.09% -0.12% $195,100 -12.04 $1,268.09 $54,346.62
Sacramento 4.19% -0.14% $268,700 -2.40 $1,362.96 $58,412.49
Miami 4.09% -0.17% $265,000 -1.85 $1,363.40 $58,431.48
Portland 4.11% -0.17% $288,900 -0.82 $1,414.08 $60,603.50
Denver 4.08% -0.20% $314,800 -0.22 $1,438.32 $61,642.15
Seattle 4.15% -0.13% $352,000 -2.20 $1,699.70 $72,844.31
Washington 3.98% -0.22% $372,800 -4.19 $1,805.88 $77,394.82
Boston 4.05% -0.21% $383,200 -4.18 $1,867.83 $80,049.93
New York City 4.22% -0.15% $390,000 -5.34 $2,042.50 $87,535.60
Los Angeles 4.07% -0.18% $450,900 -6.43 $2,092.18 $89,664.86
San Diego 4.07% -0.21% $493,100 -4.77 $2,226.76 $95,432.68
San Francisco 4.02% -0.18% $742,900 -0.20 $3,323.79 $142,448.33
About the author:

TMTim Manni is the Managing Editor of HSH.com.