Mortgage research site HSH.com recently completed a study that determined how much money someone would need to make annually in order to afford a median-priced home. They looked at 27 metro areas and calculated what people’s salary would need to be to cover the principal as well as taxes, insurance payments and interest.
HSH.com discovered that although homebuyers need to make a salary of $48,604 to afford a median-priced home in America on average, the salary requirements vary wildly depending on the location in question. For example, in places like St. Louis, the required salary was around $34,000. However, in more upscale areas, like Los Angeles and San Diego, salary requirements for a median-priced home could be upwards of $90,000. San Francisco had the highest income requirements, coming in at $142,448!
Researchers involved in the study made a few assumptions to obtain their numbers. Homeowners were to have put 20 percent down on their home and spend 28 percent of their gross monthly income on housing costs. To figure out how much the costs of a home were and the taxes, interest and insurance payments someone would be likely to face, they used a variety of sources for data. This included information from the National Association of Realtors on home prices, Tax Foundation data regarding property tax for metro areas and average homeowner premium costs from the Insurance Information Institute. HSH.com used its own data to determine the average interest rate for 30-year, fixed-rate mortgages.