Even with a six-figure salary, it might not be a great idea to buy a house in San Francisco.
The most expensive city in the U.S to buy a home is San Francisco, where homebuyers need a $206,760 salary to live comfortably and buy a house. One of the most affordable places to buy a house was Jackson, Miss., where homebuyers only need $44,129 a year to buy a home and keep up with other living costs, according to an analysis of Zillow, Urban Institute and Census data by Finder, an Australian fintech company.
“Keeping their salary in mind, this can give people an idea whether it will always be difficult [to make housing payments with cost of living]. Prospective homeowners can look at other options [locations] and find a place to work that’s going to be more comfortable for their finances,” said Britny Lawhorn, assistant publisher of mortgages at Finder.
A six-digit salary was required in San Jose ($151,619), Los Angeles ($109,985) and San Diego ($101,023), according to the study. The median household income in California was $91,377 in 2019, according to Census data — which makes home buying unaffordable for most Californians. Two-earner households did make an average $114,555 a year, which would allow comfortable homeownership in Los Angeles (recommended $112,570).
“One thing that we noticed is that California comes up as the most expensive. A lot of factors go into how expensive it is to live in a certain state, like state taxes,” said Lawhorn. Seattle also came up as one of the most expensive locations, with a recommended salary of $112,570 before buying a home (the median household income in Seattle was $102,586).
In Jackson, Miss. and Birmingham, Ala., homes typically cost less than $70,000 and cheap living expenses mean that residents need to make less than $49,000 to live comfortably and own a home.
“A lot of the affordable areas are in the Southeast. Alabama, Tennessee, Georgia, South Carolina — we’re seeing those areas. In Tennessee, we don’t have high taxes, so it’s cheaper to buy property,” said Lawhorn, who currently lives in Tennessee.
Other places that require salaries under $53,000 include Memphis, Tenn., Little Rock, Ark. Tulsa, Okla. and Augusta, Ga., although households in Memphis typically make less than that ($43,794), according to the most recent Census data.
“The pandemic is opening a lot of options for people because businesses are shifting to be more remote-work friendly,” said Lawhorn. “I can move to a cheaper area while still working where I want to work.”
U.S. home prices were up 11.1% year-over-year, selling for a median $350,000 in September, according to Realtor.com. But because low mortgage rates have increased purchasing power, homes are about 4.8% more attainable relative to income than they were last year, according to First American, a Santa Ana, California-based provider of title insurance, settlement services and risk solutions for real estate transactions.
“I thought it was really interesting to see the required salary in each area change compared to last year. It looks like affordability must have increased at least 10-15% in most cities, but what is driving a lot of that is the lowering interest rates,” said Lawhorn.
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