How much salary do you need to earn in order to afford the principal and interest payments on a median-priced home in your metro area?
To find out, HSH.com took the National Association of Realtors’ second-quarter data for median-home prices and HSH.com’s second-quarter average interest rate for 30-year, fixed-rate mortgages to determine how much of your salary it would take to afford the base cost of owning a home--the principal, interest, taxes and insurance--in 27 metro areas.
We used standard 28 percent "front-end" debt ratios and a 20 percent down payment subtracted from the NAR’s median-home-price data to arrive at our figures.
For the second straight quarter, we've incorporated information on property taxes and homeowner’s insurance costs to more accurately reflect the income needed in a given market. We also included data on Detroit and Pittsburgh for just the second time. Read more about the methodology and inputs on the final slide of this slideshow.
On a national scale, the NAR reported that a smaller number of metropolitan areas saw median-home-price increases in the second quarter as compared with the first. Double-digit price increases in particular were on the decline, according to the NAR. That said, every metropolitan area on our list saw price increases, some much larger than others. Quarterly price increases ranged from as low as 2.21 percent in Phoenix to as high as 25.27 percent in Cleveland.
As for mortgage rates, every metro on our list saw rate declines during the second quarter. The 30-year conforming fixed-rate mortgage sank to 4.17 percent during the week ending May 30, the lowest rate so far in 2014. But falling mortgage rates weren’t enough to balance out the home-price increases in the second quarter, causing the required salary figures to increase in all but two metro areas. And the salary decline in those two metros was less than $100.
Here’s a current look at how much salary you would need to earn in order to afford the principal, interest, taxes and insurance payments on a median-priced home in your metro.
Source: "The Salary You Must Earn to Buy a Home in 27 Markets," HSH.com (Aug. 15, 2014)