If you live in an expensive city, can you afford to buy a home there? And even if you can afford it, will you be able to obtain a mortgage? To help you figure it out, the mortgage research site HSH.com has crunched the numbers for the 50 largest metro areas in the U.S., looking at both the most expensive and least expensive real estate markets.
The good news for home buyers is that overheated real estate prices finally seem to be stabilizing as more inventory has come on the market and the buying frenzy of the past few years has slowed a bit. That may be especially true in the West, where prices nearly doubled in the past six years, and which is finally seeing slower price increases than the rest of the country. Meantime, mortgage rates shot up late last year, approaching 5 percent and possibly driving some softening of home prices. But, on average, they've come back down to where they were about a year ago.
Paying for a home, of course, means more than just making your monthly mortgage principal and interest payments. You'll also have to pay property taxes and buy homeowner's insurance, expenses that may or may not be collected by your lender as part of your monthly mortgage payment. And if you make a down payment of less than 20 percent on your new home, you'll need to pay for mortgage insurance as well.
Unless you can buy your new home for cash, the real question is: Can you get a mortgage? HSH.com answers that question as well, assuming a 20 percent down payment, and following the rule most lenders use that requires your total principal and interest payment, plus taxes and insurance, to amount to no more than 28 percent of your income. If you can only put down 10 percent on your home, then you'll need more income, both to cover a higher principal and interest payment, and also to cover the required mortgage insurance. HSH.com has done the math for both a 20 percent and 10 percent down payment in each of these cities, using National Association of Realtors numbers for median home prices in the last quarter of 2018. It also calculated local mortgage rates, using data from Freddie Mac and from the Mortgage Bankers Association of America.
You can find the full list here. Here's a look at some of the priciest places.
1. San Jose
Needed income: $254,836
Median home price: $1,250,000
San Jose is considered the center of Silicon Valley, and it has the cost of living to prove it. Home prices are higher even than in the San Francisco metro area. And, yup, you need more than a quarter of a million dollars in annual income to buy a home here. The good news, if you can call it that, is that home prices are down slightly--by 1.57 percent--compared to a year ago.
HSH.com calculates typical mortgage rates at 4.98 percent, making for monthly payments of $5,946 for a home. If you only put down 10 percent down payment, then you'll need to earn $294,779 a year to get a mortgage.
2. San Francisco
Needed income: $198,978
Median home price: $952,200
Some companies are offering tech professionals in San Francisco "delocation" packages that pay for a move to a different, more affordable area of the country where they can work remotely. You can see why--their salaries would go a lot further anywhere else, except for San Jose.
HSH.com calculates typical mortgage rates at 4.98 percent, for a monthly payment of $4,643. If you can only put down 10 percent, then you'll need a salary of $229,405 to get a mortgage. That's almost enough to live in San Jose.
3. San Diego
Needed income: $131,641
Median home price: $626,000
Getting out of Northern California can mean coming back down to earth, at least a bit, when it comes to home prices. In this city of beaches that borders Mexico, prices are high, but not in the stratosphere.
HSH.com calculates typical mortgage rates at 4.98 percent, for a monthly payment of $3,072. If you only put down 10 percent, you'll need income of $153,656.
4. Los Angeles
Needed income: $123,156
Median home price: $576,100
This city is full of dreamers, and some of them dream of home ownership. HSH.com estimates a mortgage rate of 4.98 percent for a monthly payment of $2,874. If you only make a 10 percent down payment, you'll need income of $141,565.
Needed income: $106,789.93
Median home price: $460,300
The city of baked beans and the Red Sox is also a technology center, and it's seen home prices rise quickly. HSH.com calculates a mortgage interest rate of 4.90 percent for a monthly payment of $2,492. If you only put down 10 percent, you'll need income of $122,882.
6. New York
Needed income: $105,684
Median home price: $403,900
This city is a center for arts and culture, broadcasting, publishing, finance, and fashion. (Inc. is here!) It also boasts large outposts of some very big tech companies, and it narrowly avoided having one more when Amazon canceled its plan to put one of two new headquarters in Queens.
HSH.com calculates local mortgage rates of 4.90 percent for a monthly payment of $2,466. If you only put down 10 percent, you'll need income of $119,805.
Needed income: $105,368
Median home price: $489,600
The metro area that brings together Boeing, Amazon, and Microsoft has seen a rapid influx of new residents in the past few years, putting a considerable strain on the housing supply.
HSH.com estimates a mortgage rate of 4.90 percent for a monthly payment of $2,459. Why is this monthly payment figure lower than in Boston or New York, even though median home prices are higher? The answer is most likely property taxes, notoriously high in New York State and Massachusetts. If you can only pay a 10 percent down payment, you'll need income of $122,484.
8. Washington, D.C.
Needed income: $94,409
Median home price: $417,400
Our nation's capital is the eighth metro area on this list and the first one where you can buy a home without a six-figure income. Unlike New York, this region is still getting its Amazon second headquarters, in Arlington, Virginia.
HSH.com estimates a mortgage rate of 4.9 percent for a monthly payment of $2,203. If you only put down 10 percent, you'll need $109,001 of income.
Needed income: $91,672
Median home price: $438,300
The Mile-High City's location near the center of the United States has made it a transportation, logistics, and communications hub, and the city has seen its population increase more than 17 percent since the 2010 census. As always, an influx of residents is driving up housing prices.
HSH.com estimates local mortgage rates at 4.90 percent for a monthly payment of $2,139. Why is that payment lower than in New York or D.C., even though the median home price is higher? Because Coloradans enjoy some of the lowest property taxes in the country.
10. Portland, Oregon
Needed income: $85,173
Median home price: $389,000
Portland, a city of walkers, runners, and cyclists, is headquarters to several athletic clothing and footwear companies, including Nike, Adidas, and Columbia. Inexpensive hydro-electric power from the Columbia River also makes it attractive to tech companies, which number more than 1,200. As elsewhere, rapid growth has made for more costly housing.
HSH.com estimates local mortgage rates of 4.90 percent, for a monthly payment of $1,987. With a 10 percent down payment, you'll need an income of $98,772 to buy a home.
Needed income: $81,030
Median home price: $363,000
California's state capital lags behind some other cities in the state for high housing prices, but it only misses being in the top ten most expensive metro areas by one place. A center for healthcare as well as government, this is another fast-growing West Coast city.
HSH.com estimates mortgage rates of 4.90 percent, for a monthly payment of $1,891. With a 10 percent down payment, you'll need income of $93,721 to buy a home.
Needed income: $79,712
Median home price: $350,000
Miami is one of the nation's largest international banking centers, and a center for international trade in general, as well as a popular metro area for retirees. Home prices have been rising swiftly, up 4.48 percent in the past year, according to HSH.com.
HSH.com estimates a typical local mortgage at 4.90 percent, for a monthly payment of $1,860. With a 10 percent down payment, you'd need income of $91,948 to purchase a home.
Needed income: $79,689
Median home price: $310,400
Home to SXSW and a growing list of tech companies, Austin regularly appears on lists of the best cities to live in in the U.S. Home prices have been climbing right along with its reputation, up 5.87 percent in the past year, according to HSH.com.
The site estimates local mortgage rates at 4.90 percent for a monthly payment of $1,859. With a 10 percent down payment, you'd need income of $90,540.