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December 2017

Publisher of loan info compares salary needed to buy homes in 50 large metropolitan areas

Homebuyers in Seattle need a salary of more than $93,000 to buy a median-priced home, according to the latest analysis by HSH.com, a publisher of mortgage and consumer loan information. That number rises to more than $109,000 if the down payment amount drops to 10 percent instead of 20 percent.

"Amid tight markets with little new supply, housing affordability continues to a spreading problem," the authors wrote in their report comparing 50 metro markets. Researchers found a majority of markets were less expensive on a quarter-to-quarter basis, but the year-over-year comparison shows only one metro area (Hartford, CT) experienced price dip, and it was a slight -1.04 percent.

Commenting on the challenges of limited inventory and rising prices, NAR Chief Economist Lawrence Yun stated, "Affordability pressures are frustratingly occurring in places where jobs are plentiful and incomes are rising. Without a significant boost in new and existing inventory to alleviate price growth, job creation could slow in high cost areas in upcoming years if residents begin exiling to more affordable parts of the country."

Seattle's high prices are eclipsed by six other metro areas. The most expensive market in the mix was San Jose. To afford its median priced home, reportedly $1,165,000 (compared to Seattle's $478,500), a buyer in the so-called "Capital of Silicon Valley" would need a salary of more than $216,000 to make a monthly payment of $5,044.

At the other end of the price spectrum is Pittsburgh where a mid-range home costs $146,000. Purchasers there need a salary of $35,205.

10 Most Expensive Large Metros
10 Least Expensive Large Metros
San Jose (#1)Pittsburgh (#1)
San FranciscoCleveland
San Diego
Los Angeles
Oklahoma City
New York City
Washington, D.C.
St. Louis
Portland (#10)
Buffalo (#10)

HSH compared both quarterly and year-over-year changes and found that 34 of the 50 markets saw annual price increases of over 5 percent. San Jose topped the increases at 16.5 percent followed by Seattle (13.36 percent) and Los Angeles (10.06 percent).

The ability of a potential homebuyer to keep up with rising prices is "increasingly difficult, if not impossible," HSH noted, adding, "Just to keep pace with rising prices, year-over-year income gains needed to be in excess of about one-third of all metros, and more than 9 percent in another nine areas.

HSH noted somewhat lower mortgage rates in the third quarter, when the report was compiled, helped improve affordability, but rates will likely rise.  Uncertainty around tax reform could pose further challenges, the analysts noted.

The calculations used in the latest comparison of metro areas were based on third-quarter data from a variety of sources including the National Association of REALTORS®, Freddie Mac and the Mortgage Bankers Association of America. HSH used standard 28 percent "front-end" debt ratios and a 20 percent down payment subtracted from NAR's price data and factored in principal, interest, property tax and homeowner's insurance (PITI) in each area.

HSH has been tracking mortgage markets for more than three decades and claims to be the nation's largest publisher of mortgage and consumer loan information. It does not make or broker mortgages.