February 9, 2023

According to a new study, a middle-income family can no longer afford the typical home in 35 of the country’s 50 largest cities.

Based on home price data from the first quarter of the year, the salary it took to pay the average American home was nearly $76,000 — about $8,500 more than the average household actually earns, according to an analysis by Visual Capitalism.

The study found that San Jose leads the nation in unaffordable homes, with an average home price of $1,875,000, requiring a salary of at least $330,758 to pay the projected monthly payments of $7,718.

The top four markets for median home prices were all in California, with San Francisco, San Diego and Los Angeles following San Jose. New York City ranks seventh on the list for home prices, slightly lower than Boston.

Meanwhile, the median household income nationwide was just $67,500, which would be enough to afford the typical home in just 15 of the cities on the list.

A new study shows the median salary needed to pay typical house payments in 50 major US cities. Median home payments are now prohibitive for the typical American family in all cities except 15

Most of the more affordable cities were in the Midwest. Pittsburgh was the most affordable, with an average home price of just $185,700, requiring a salary of just $42,858 to pay monthly payments.

In addition to Pittsburgh, a family making $50,000 a year or less could afford the average home payment in St. Louis, Louisville, Cleveland and Oklahoma City, the study found.

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Typical income varies from country to country, and the cities with the most expensive homes usually have some of the highest average salaries.

Still, median home pay has outpaced median local salaries in many of the cities on the list — a symptom of the broader problem of unaffordability that has seen prices outpacing wages for some time.

The study assumes a 20 percent down payment and assumes that no more than 28 percent of household income goes toward monthly house payments.

The report was based on data from Home Sweet Home for the first quarter of 2021, which put the median US home price at $368,200 and the median fixed mortgage rate at 4 percent.

In fact, house prices and mortgage rates have risen since then, meaning that research in many markets may even underestimate the salary it takes to pay for a house.

The study found that San Jose leads the nation in unaffordable homes, with an average home price of $1,875,000, requiring a salary of at least $330,758 to pay the projected monthly payments of $7,718.

Although the housing market has cooled in recent months, prices continue to rise, albeit at a slower pace than last year

The national median home price is up 13.4 percent in June from a year earlier to $416,000. That’s a record high in data dating back to 1999, according to the National Association of Realtors.

Last week, the average long-term mortgage rate in the US stood at 4.99 percent, below 5 percent for the first time in four months.

That’s still nearly double the rates seen recently in January, as mortgage costs have risen with higher Federal Reserve benchmark rates.

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The Fed last week raised its key lending rate by three-quarters of a point, the second such hike in less than two months, and raised its key interest rate to 2.5 percent, from nearly zero at the start of the year.

But even if interest rates rise, house prices have yet to fall after rising faster than wages for some time.

While the red-hot housing market has cooled somewhat, the most recent data shows it has continued to rise, with demand outpacing the tight supply.

A report by S&P CoreLogic Case-Shiller showed that national house prices rose 19.7 percent in May from a year ago, after rising 20.6 percent in April.

National house prices rose 19.7 percent in May from a year ago, after rising 20.6 percent in April

A report from S&P CoreLogic Case-Shiller shows that home prices continue to rise in 20 major U.S. cities, but the rises are beginning to abate on the West Coast, where prices are already highest

Home prices rose double-digit year-over-year in every city covered by the index, even as gains began to slow in many markets.

Tampa led the way with an annual price increase of 36.1 percent, followed by Miami with a 34 percent increase and Dallas with a 30.8 percent increase.

Year-over-year, Minneapolis had the smallest year-on-year increase in home prices at 11.5 percent, followed by Washington DC at 12.2 percent and Chicago at 12.9 percent.

“May 2022 housing data remained strong as price increases slowed slightly from very high levels,” said Craig J. Lazzara, Managing Director at S&P DJI.

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‘But at city level we also see signs of slowing down. Price increases for May surpassed those for April in just four cities,” he added. “In February of this year, all 20 cities accelerated.”

The contract rate on a 30-year mortgage averaged 5.54% at the end of July, as the Fed’s key policy rate rises

In another sign of a housing market slowdown, the NAR said last month that pending home sales fell 20 percent in June from a year ago.

“Signing contracts to buy a home will continue to fall as long as mortgage rates continue to rise, as has happened so far this year,” said NAR chief economist Lawrence Yun.

“Home sales will fall 13 percent in 2022, according to our latest forecast,” Yun added, forecasting mortgage rates to stabilize at around 6 percent and home sales to pick up again in early 2023.

There have already been layoffs in the housing and credit sector. Among those who have reported job losses in recent months are the online mortgage company LoanDepot, online brokerage Redfin and Compass.

The nation’s largest bank by assets, JPMorgan Chase, fired hundreds of its mortgage unit and reappointed hundreds of others.