- If you want to shop in one of the two most expensive metro areas in the US, you’ll need to earn more than $400,000, according to a recent report.
- To put these numbers in perspective, the median household income in the U.S. was $75,000 in 2022, according to the report.
- “The Bay Area has consistently been one of the most expensive markets in the country,” said Daryl Fairweather, Redfin chief economist.
As home prices and interest rates rise, home buyers need a salary of $114,627 to afford a median-priced home in the U.S., according to a recent study. delay By real estate site Redfin.
If you want to shop in one of the priciest metropolitan areas in the U.S., you’ll have to earn even more: More than or near $200,000 in the top 10 cities, researchers estimate. And buying the two most expensive metros would require salaries of more than $400,000. Redfin analyzed average monthly mortgage payments in August 2023 and August 2022.
To put these numbers in perspective, the median household income in the U.S. was $75,000 in 2022, according to the report.
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According to Redfin, San Francisco and San Jose, California, are the top two metros requiring the highest salaries, at $404,332 and $402,287, respectively.
“The Bay Area has consistently been one of the most expensive markets in the country,” said Daryl Fairweather, Redfin chief economist.
Three more California metros (Anaheim, Oakland and San Diego) are in the top five, requiring interested buyers to earn between $240,000 and $300,000 annually.
Average income in these cities is high, but real estate prices are also high. Because higher interest rates increase the cost of borrowing, buyers will need to show significant income to qualify for a mortgage.
Midtown Manhattan as seen from Hoboken, New Jersey.
Gary Hershorn | Corbis News | Getty Images
Although New York’s Manhattan borough has the highest cost of living among U.S. cities, according to the Council for Community and Economic Research’s Cost of Living Index, the New York metropolitan area as a whole ranks ninth on Redfin’s list.
That’s because the metro area extends beyond Manhattan and the city’s four other boroughs into nearby boroughs.
“Even though Manhattan is really expensive, when you get to remote areas [in] “The New York metro area is actually becoming quite affordable,” Fairweather said.
Of course, home buyers in the area still need to earn a six-figure annual income to afford a home; About $197,734, according to Redfin’s estimates.
In some competitive markets, earning a high salary is not enough. Buyers may find themselves competing against previous homeowners who may make cash offers.
Fairweather said some home buyers are using home equity to buy new homes in low-priced areas instead of financing to avoid the 8 percent mortgage rate.
“This could cause prices to rise and affordability to fall,” he said.
The share of first-time homebuyers decreased from 29% in August to 27% in September. according to this In the same period, the rate of all-cash buyers increased from 27% to 29%.
Historically, first-time homebuyers will make up about 40% of the housing market, said Jessica Lautz, deputy chief economist and vice president of research for the National Association of Realtors.
“Seeing that at 27% speaks to the affordability and inventory challenges facing first-time homebuyers,” Lautz said.
Lautz added that all-cash home buyers are largely older consumers who have substantial home equity and can trade homes without new mortgage financing.
Additionally, while some all-cash buyers are local to the areas they purchase from, long-distance movers are more likely to pay in full.