You'll Never Guess How Much You Need to Earn to Buy a Typical Home in These Cities

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Most Americans would like to own their own home, but that's easier said than done -- more so in some locations than others, because of great fluctuations in home prices from region to region. It's true that many jobs pay a little more or less in certain metropolitan regions, because of the cost of living locally, but that's often not enough.

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Here's a look at how much you'd have to earn in various metropolitan areas to buy a median-priced home, using data from mortgage specialist HSH.com, along with some tips on how you might go about securing a great home.

Top 10, bottom 10

The following tables list the 10 metropolitan regions where you'd have to earn the most to buy a home of median value and the 10 regions where the lowest annual incomes would suffice. Note that for all of them, a 30-year fixed-rate mortgage is assumed, with an interest rate of about 4%. In California's large cities, a more representative rate of 4.12% was used. The monthly payments reflect not only the mortgage itself but also insurance and property taxes. Here are the priciest areas:

Metro Area

Median Home Price

Monthly Payment

Minimum Salary Required

National average

$254,000

$1,292

$55,391

San Jose

$1,165,000

$5,044

$216,181

San Francisco

$900,000

$3,998

$171,330

San Diego

$607,000

$2,709

$116,120

Los Angeles

$595,100

$2,685

$115,069

New York City

$419,100

$2,314

$99,151

Boston

$464,100

$2,274

$97,465

Seattle

$478,500

$2,180

$93,418

Washington, D.C.

$408,500

$1,972

$84,503

Denver

$418,100

$1,854

$79,459

Portland

$389,400

$1,794

$76,884

If you were assuming New York City would have the highest costs, you're wrong -- fully four cities in California surpass it, leaving it in fifth place. In San Jose, you'd need to earn roughly four times the national average income to afford a median-priced home -- and that home would cost well over a million dollars! That metropolitan region is home to about 2 million people, too, and if you combine it with the San Francisco metro region, No. 2 on the list, more than 8 million people are involved. When home prices are in nosebleed territory, it can cause financial distress for many. Lots of people, simply unable to afford to buy a home, will rent -- paying steep rates for that, too, while not building any equity. Those who do manage to buy will have much of their net worth tied up in their home, and should home values drop, especially around the time they need to sell, they could lose a lot.

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So which areas permit homeownership for more modest incomes? Well, the following list shows the 10 areas with the lowest minimum required salaries:

Metro Area

Median Home Price

Monthly Payment

Minimum Salary Required

National average

$254,000

$1,292

$55,391

Pittsburgh

$146,000

$821

$35,205

Cleveland

$146,000

$851

$36,463

Indianapolis

$173,700

$856

$36,670

Oklahoma City

$158,800

$870

$37,307

Memphis

$172,700

$882

$37,820

Louisville

$175,700

$885

$37,940

Cincinnati

$169,100

$926

$39,695

Birmingham

$198,700

$936

$40,096

St. Louis

$176,500

$953

$40,822

Buffalo

$151,600

$972

$41,648

What to do

These 10 regions clearly offer lots of bargain housing, but if you have a good job at a company in Boston, where you also have deep social and familial roots, you probably don't want to leave it all for a home in Cleveland. Here, then, are some ways you might be able to swing buying a home in a costly region:

  • Buy less home. The prices listed are median prices. If you're willing to accept a smaller home, and/or one in a less desirable neighborhood, and/or one that offers avocado-colored tiles in the bathroom, and wallpaper or wood paneling on many walls, you can pay a lot less than the median price.

  • Save up for longer. If you can pay at least 20% down, you can avoid having to buy private mortgage insurance. The more you put down, the smaller loan you'll need to take out, and that will give you lower monthly payments.

  • Beef up your credit score. The higher your credit score, the lower the interest rates you'll be offered, and that can make a big difference in your monthly payments, too. Spending some months or a year to increase your credit score, perhaps by paying bills on time and reducing your debt load, can be well worth it.

  • Get the best mortgage. The kind of mortgage you get will determine your monthly payments, so read up and choose well. For example, if you don't expect to be in the home for more than five or seven years, you might get an adjustable-rate mortgage, which features a lower interest rate that stays fixed for five to seven years before being adjusted in accordance with prevailing rates.

Don't let steep home prices deter you -- but do take time to learn more about real estate and your local home-buying environment. Some smart moves can shave a lot of money off your monthly payments.

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