Seven years after the U.S. housing market bottomed in February 2012, the market has staged a dramatic recovery. U.S. housing prices are now about 11 percent higher than their 2006 peak, according to the latest S&P/Case-Shiller U.S. National Home Price Index data.
While that surge in home prices is great for homeowners, it’s made it difficult for homebuyers, particularly younger buyers in large cities where the real estate market is hottest.
To make matters worse, rising interest rates have pushed mortgage rates higher than they’ve been in years, creating yet another obstacle for buyers. HSH.com recently compiled a list of the most- and least-affordable U.S. metro housing markets. The list incorporates median housing prices, interest, taxes and insurance payments and is ranked by the salary a homebuyer would need to afford the average home in each market.
On a national level, the salary needed to comfortably afford a home is $61,453, according to HSH.com. That estimate is based on an average mortgage rate of 4.9 percent on a median home price of $257,600. That average home price is up 3.95 percent from a year ago. The average monthly mortgage payment is around $1,433.
Least Affordable Markets
Of course, some markets are much pricier than the national average. The following are the top five most expensive housing markets:
San Jose, California
- Median home price: $1.25 million
- Year-over-year change: -1.5 percent
- Monthly payment: $5,946
- Salary required: $254,835
San Francisco, California
- Median home price: $952,200
- Year-over-year change: +3.5 percent
- Monthly payment: $4,642
- Salary required: $198,978
San Diego, California
- Median home price: $626,000
- Year-over-year change: +2.6 percent
- Monthly payment: $3,071
- Salary required: $131,640
Los Angeles, California
- Median home price: $576,100
- Year-over-year change: +4.1 percent
- Monthly payment: $2,873
- Salary required: $123,156
- Median home price: $460,300
- Year-over-year change: +2.6 percent
- Monthly payment: $2,491
- Salary required: $106,789
Most Affordable Markets
If these numbers are enough to make the average American earner dizzy, there are also plenty of metro housing markets around the country that are much more affordable. The following are the five most affordable cities to buy a house, according to HSH.com:
- Median home price: $141,625
- Year-over-year change: +4.9 percent
- Monthly payment: $878
- Salary required: $36,659
- Median home price: $150,100
- Year-over-year change: +6.9 percent
- Monthly payment: $943
- Salary required: $40,437
Oklahoma City, Oklahoma
- Median home price: $161,000
- Year-over-year change: +5.3 percent
- Monthly payment: $964
- Salary required: $41,335
- Median home price: $174,000
- Year-over-year change: +4.3 percent
- Monthly payment: $966
- Salary required: $41,400
- Median home price: $185,200
- Year-over-year change: +7.4 percent
- Monthly payment: $986
- Salary required: $42,288
Millennials Getting Burned
In addition to paying higher prices for homes, a recent survey by Bankrate suggests that millennials are being too hasty about jumping into the market. One in three millennials under the age of 35 own a home, but 63 percent of those young homeowners admitted to having regrets about the home they purchased.
The biggest source of buyer's remorse for millennial homeowners is underestimating the amount of hidden costs associated with owning a home. Insurance costs, property taxes and closing costs can add up to between 2 and 5 percent of the total value of the home, but many buyers don’t consider these fees when shopping for homes.
Homeowners should also set aside at least 1 percent of the value of the home each year for repairs and maintenance, according to HGTV.
In addition to paying too much, nearly 1-in-5 (18 percent) of millennial homeowners regret not buying a larger house.
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