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SmartAsset: Salary Needed to Afford Home Payments in the 15 Largest U.S. Cities - 2022 Edition

Housing costs for new homeowners are at an all-time high with double digit home price increases over a one-year period since 2021. However, median household income has not kept pace, decreasing by 2.9% over a similar one-year period. Affording monthly home payments is challenging in today’s economy, especially when considering the non-mortgage debt that many prospective homebuyers are tackling, such as student loans and credit card debt.

To understand how much income is needed to afford home payments, we compared the 15 largest cities (where roughly 30 million people reside) across these five metrics: median home value, property tax rate, down payment, homeowners insurance and other monthly non-mortgage debt payments. Specifically, we estimated how much money you need to make – and not exceed the recommended 36% debt-to-income ratio – to afford monthly home payments.

To account for differing financial situations, we considered four scenarios: prospective homebuyers with no additional debt and those with monthly debt payments of $500, $750 and $1,000. For details on our data sources and how we put all the information together to create our final rankings, read the Data and Methodology section below.

This is SmartAsset’s fifth study on the salary needed to afford home payments in the 15 largest cities. Check out the previous version here.

Key Findings

  • Bay Area cities require the highest salaries to pay for housing. San Francisco (No. 1) and San Jose (No. 2) require the highest minimum salaries to afford home payments. For no debt scenarios, this figure is $261,567 and $230,633 respectively. But with $1,000 monthly debt, the salary needed can go as high as $294,900.
  • There’s a $1.2 million difference in the average home sales price between the No. 1 and No. 15 ranked cities. The average home sales price for San Francisco, California is roughly $1.4 million compared to roughly $261,000 in Philadelphia, Pennsylvania.

The No Debt Scenario

San Francisco, California is the city where the highest salary is needed to afford home payments. Even homeowners without debt in San Francisco would need to earn at least $261,567 to afford the monthly home payments on an average priced home of $1.4 million, assuming a 20% down payment.

San Francisco and San Jose are the only California cities in our study above the $200,000 threshold in a no debt scenario, with Los Angeles and San Diego requiring at least $180,800 and $146,100, respectively. Another major city, New York City, New York requires the fourth-highest salary to afford home payments ($146,100).

The city requiring the lowest income is Philadelphia, Pennsylvania, where at least $49,100 is needed to afford the average-priced home of $171,600. There are two other cities where a salary that is less than $50,000 could afford home payments: Columbus, Ohio ($49,600) and Jacksonville, Florida ($49,533). The table below shows our findings for a no debt scenario and an additional situation in which the homeowners also make a monthly non-mortgage debt payment of $1,000.

Affording Home Payments With Debt

Roughly 80% of Americans have debt in some shape or form and have to navigate rising housing costs alongside their monthly debt payments. In this study, we accounted for three debt scenarios: an individual with a monthly debt payment of $500, $750 and $1,000. Assuming a 36% debt-to-income ratio, the salary needed to afford home payments increases by $16,667 for every $500 of monthly debt.

For those who have a monthly debt payment of $500, the lowest salary needed to afford home payments is $65,767 in Philadelphia, Pennsylvania. Meanwhile, a resident in this city can expect to need just under $82,500 if they have $1,000 monthly debt payments. Comparatively, a San Francisco, California resident with $500 in monthly debt payments will need to earn at least $278,233 to comfortably afford monthly home payments and that figure nears $300,000 when you double the monthly debt payment to $1,000.

The Costs of Homeownership

A homeowner has numerous recurring expenses that come with settling down and for this study we considered property taxes, home insurance and the monthly home payment. The property tax rate varies between 0.60% in Phoenix, Arizona and 2.03% in Fort Worth, Texas. San Francisco, California - the city requiring the highest income - has a 0.64% property tax rate. This translates into average annual real estate taxes that vary by nearly $6,000 between Phoenix, Arizona ($1,496) and San Francisco, California ($7,347).

Insuring one’s investment is vital and is commonly required as a condition of one’s mortgage. According to Forbes, the national average for a home insurance policy is $1,854. In this study, we assumed an annual homeowners insurance payment of 0.35%, meaning that the average cost of homeowners insurance across the top 15 largest cities varied from $914 to $5,117.

Finally, monthly home payments can be a painful reminder of today’s market of elevated home prices and rising interest rates. The average across the largest 15 cities is $3,278, but six cities have an average above this: four California cities (San Francisco, San Jose, Los Angeles and San Diego), New York City, New York ($4,383) and Austin, Texas ($3,558). In contrast, Philadelphia, Pennsylvania has the lowest average monthly home payment of $1,473.

Data and Methodology

To find the minimum required salary to afford home payments in the 15 largest U.S. cities, we used the average home sales price in each city to calculate the cost of a 20% down payment. Assuming the effective property tax rate and an annual homeowners insurance payment of 0.35%, we used our mortgage calculator to find the average monthly home payment for a 30-year mortgage with a 5.5% interest rate.

After finding the average monthly home payment, we calculated the income needed to make those payments while not exceeding a 36% debt-to-income ratio. We also considered the necessary income to make home payments based on prospective homebuyer debt levels, which ranged from no monthly debt payments to debt payments totaling $1,000 per month.

We ranked each city from the highest minimum income (with no additional debt) needed to afford home payments to the lowest minimum income (with no additional debt) needed. Data comes from the Census Bureau’s 2020 5-year American Community Survey and Redfin (February 2021 to February 2022).

Financial Tips for Homeownership

  • Set tangible financial goals. It might feel like housing costs are eating up more of your paycheck than you can manage. Learn how to take control of your spending with SmartAsset's guide on how to set financial goals. Follow the steps and adjust to meet your own financial needs.
  • Know what costs to expect when home buying. SmartAsset offers free tools to get a sense for how much you can afford to spend, to understand what your closing costs could be and how much to expect to pay in property taxes.
  • Consider working with an expert. A financial advisor can guide you through the process of buying a home and help you manage your assets. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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

Photo credit: ©iStock/Nuthawut Somsuk

Anja Solum Anja Solum is a data journalist at SmartAsset covering a variety of personal finance topics, including retirement and debt management. Before joining SmartAsset, she worked on both agency and in-house content marketing teams where she developed her love for data analysis and visualization. In her free time, she nurtures a passion for gaming, a recent addiction to anime & KDramas, and a mischievous labrador retriever. A bit of a nomad, she’s lived in Norway, Jamaica, and Denmark in addition to the U.S. but now resides in Raleigh, North Carolina.
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