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Salary Needed to Afford Home Payments in the 15 Largest U.S. Cities – 2019 Edition

Derek Miller, CEPF®
salary needed to afford a home

Even though many people picture the high cost of living when they think of America’s biggest cities, the housing markets in these areas actually vary quite a bit. Part of that range comes from particular local factors such as property taxes. It is helpful to be aware of a city’s reputation as expensive or affordable, but in order to make the step from renter to homeowner in a responsible fashion, it’s a good idea to have a plan. To help people make the most of their savings, below we model the salary needed to afford the average home in America’s largest cities.

In order to model the salary needed to afford home payments, we used five inputs: home value, down payment, property tax rate, homeowners insurance and other monthly debt payments. The Data and Methodology section below shows our sources and how we put the data together to create our final rankings.

Key Findings

  • California homes cost the most – Homes in California’s largest cities are expensive. In three of California’s largest cities, households need an income of at least six figures under the best circumstances just to afford the median home. Those who are carrying substantial debt payments will need to make significantly more than $100,000.
  • Bargains are still out there – Homeownership is still an option for middle-class Americans in some cities. In cities like Philadelphia, Pennsylvania; San Antonio, Texas and Columbus, Ohio, residents can afford the median home for less than $65,000, even if they have other debt obligations like student and auto loans.
salary needed to afford home payments

1. San Francisco, CA

Median home value: $1,104,100
Salary needed to afford home payments: $172,153
Salary needed to afford home payments with $500 in monthly debt payments: $188,819
Salary needed to afford home payments with $750 in monthly debt payments: $197,153
Salary needed to afford home payments with $1,000 in monthly debt payments: $205,486



2. San Jose, CA

Median home value: $854,700
Salary needed to afford home payments: $137,304
Salary needed to afford home payments with $500 in monthly debt payments: $153,971
Salary needed to afford home payments with $750 in monthly debt payments: $162,304
Salary needed to afford home payments with $1,000 in monthly debt payments: $170,637



3. Los Angeles, CA

Median home value: $647,000
Salary needed to afford home payments: $101,420
Salary needed to afford home payments with $500 in monthly debt payments: $118,087
Salary needed to afford home payments with $750 in monthly debt payments: $126,420
Salary needed to afford home payments with $1,000 in monthly debt payments: $134,753



4. New York, NY

Median home value: $609,500
Salary needed to afford home payments: $98,082
Salary needed to afford home payments with $500 in monthly debt payments: $114,749
Salary needed to afford home payments with $750 in monthly debt payments: $123,082
Salary needed to afford home payments with $1,000 in monthly debt payments: $131,415



5. San Diego, CA

Median home value: $600,300
Salary needed to afford home payments: $94,766
Salary needed to afford home payments with $500 in monthly debt payments: $111,433
Salary needed to afford home payments with $750 in monthly debt payments: $119,766
Salary needed to afford home payments with $1,000 in monthly debt payments: $128,100



6. Austin, TX

Median home value: $332,700
Salary needed to afford home payments: $61,856
Salary needed to afford home payments with $500 in monthly debt payments: $78,523
Salary needed to afford home payments with $750 in monthly debt payments: $86,856
Salary needed to afford home payments with $1,000 in monthly debt payments: $95,190



7. Chicago, IL

Median home value: $255,900
Salary needed to afford home payments: $46,370
Salary needed to afford home payments with $500 in monthly debt payments: $63,037
Salary needed to afford home payments with $750 in monthly debt payments: $71,368
Salary needed to afford home payments with $1,000 in monthly debt payments: $79,704



8. Phoenix, AZ

Median home value: $231,000
Salary needed to afford home payments: $35,953
Salary needed to afford home payments with $500 in monthly debt payments: $52,620
Salary needed to afford home payments with $750 in monthly debt payments: $60,953
Salary needed to afford home payments with $1,000 in monthly debt payments: $69,287



9. Fort Worth, TX

Median home value: $169,400
Salary needed to afford home payments: $32,953
Salary needed to afford home payments with $500 in monthly debt payments: $49,619
Salary needed to afford home payments with $750 in monthly debt payments: $57,953
Salary needed to afford home payments with $1,000 in monthly debt payments: $66,286



10. Dallas, TX

Median home value: $190,600
Salary needed to afford home payments: $35,757
Salary needed to afford home payments with $500 in monthly debt payments: $52,424
Salary needed to afford home payments with $750 in monthly debt payments: $60,757
Salary needed to afford home payments with $1,000 in monthly debt payments: $69,090



11. Houston, TX

Median home value: $173,600
Salary needed to afford home payments: $32,468
Salary needed to afford home payments with $500 in monthly debt payments: $49,134
Salary needed to afford home payments with $750 in monthly debt payments: $57,468
Salary needed to afford home payments with $1,000 in monthly debt payments: $65,801



12. Jacksonville, FL

Median home value: $177,000
Salary needed to afford home payments: $29,023
Salary needed to afford home payments with $500 in monthly debt payments: $45,690
Salary needed to afford home payments with $750 in monthly debt payments: $54,023
Salary needed to afford home payments with $1,000 in monthly debt payments: $62,356



13. Columbus, OH

Median home value: $151,400
Salary needed to afford home payments: $28,694
Salary needed to afford home payments with $500 in monthly debt payments: $45,361
Salary needed to afford home payments with $750 in monthly debt payments: $53,694
Salary needed to afford home payments with $1,000 in monthly debt payments: $62,028



14. San Antonio, TX

Median home value: $148,200
Salary needed to afford home payments with no other debt: $28,376
Salary needed to afford home payments with $500 in monthly debt payments: $45,042
Salary needed to afford home payments with $750 in monthly debt payments: $53,376
Salary needed to afford home payments with $1,000 in monthly debt payments: $61,709



15. Philadelphia, PA

Median home value: $166,200
Salary needed to afford home payments with no other debt: $27,484
Salary needed to afford home payments with $500 in monthly debt payments: $44,151
Salary needed to afford home payments with $750 in monthly debt payments: $52,484
Salary needed to afford home payments with $1,000 in monthly debt payments: $60,817



salary needed to afford home payments

Data and Methodology

In order to estimate the salary needed to afford home payments in the 15 largest cities (by population) in the country, we gathered data from the U.S. Census Bureau. We started with the median home value in each city and calculated how much a 20% down payment would cost. Then we plugged that data into our mortgage calculator. We assumed that each prospective homebuyer would get a 30-year mortgage with a 4% interest rate for 80% of the home value (the balance after paying a 20% down payment). We also assumed that buyers would have annual homeowners insurance of 0.35%. For the purpose of this study, we assumed prospective homebuyer debt levels that ranged from no monthly debt payments to debt payments totaling $1,000 per month.

We then added up the total monthly payments on the mortgage, real estate taxes and homeowners insurance. Our calculator recommended a minimum income needed to make these payments. We ranked each city from the highest minimum income to the lowest minimum income. Median home values and median household incomes are from the U.S. Census Bureau’s 2017 1-year American Community Survey.

Tips for Buying a Home

  • Don’t stretch yourself too thin – The dream of homeownership is an alluring one. You may find yourself wondering if you can maybe cut a few things out of your budget so that you can buy a nicer home. It is generally a good idea to stay within your means rather than splurging on the nicest home possible. The economy is unpredictable; not living within your means may leave you struggling if something unfortunate should happen.
  • Ask an advisor – Renting for life is not necessarily a bad thing. Renters have greater mobility than homeowners and are not tied down by a mortgage. Depending on the housing market, it may make more financial sense to rent. But before you decide, why not check in with a financial advisor who can make sure your financial plans align with your long-term goals? If you are not sure where to find a financial advisor check out SmartAsset’s financial advisor matching tool. It will pair you with up to three local financial advisors who fit your investing needs.

Questions about our study? Contact us at press@smartasset.com

Photo credit: ©iStock.com/monkeybusinessimages

The post Salary Needed to Afford Home Payments in the 15 Largest U.S. Cities – 2019 Edition appeared first on SmartAsset Blog.

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