The Salary Needed to Buy a House (2023)

The team at RubyHome compiled and computed real estate market statistics to show the income needed to buy a single-family home in the United States. We made year-over-year comparisons of median home prices and interest rates -- along with taxes and insurance calculations -- to generate monthly mortgage payment figures, and then computed the necessary salary to cover those payments.

Here's a summary of what you'll find on this page:

Home Affordability Key Stats

  • The salary need to by the average single-family home in the United States is $103,389.

$103,389 is the income required to buy an average home

  • Mortgage interest rates moved from 3.10% to 5.82%, an 88% increase since summer of 2022.
  • Homebuyers face 20-year-high mortgage rates, but still below the 8% historical average.
  • Year-over-year pending home sales are down 37%.

The Average Income Needed to Buy a House

Comparing recent home buying data, the income required to buy the average single-family home in the United States rose from $75,391 in 2021 to $103,389 in 2022, an increase of $27,998.

What a difference a few months make. In the early summer of 2022, interest rates hovered at 3.1%. Then, the Federal Reserve began its effort to combat inflation by implementing successive interest rate hikes (.75 basis points each) until mortgage rates reached nearly 7%. Accounting for some fluctuations, the average 30-year rate in Q3 2022 was 5.82%.

Suffice it to say, the cost of borrowing money (vis a vis interest rates) became much more expensive: monthly mortgage payments are now significantly higher.

Factors that Influence Home Affordability

The relationship between home prices, interest rates, and household income drives home affordability.

At any given time, one variable may outpace the others, but eventually, they return to equilibrium.

What’s more, each variable moves at a different pace. For example, the Federal Reserve’s interest rate change will immediately impact loan rates. However, household income and home prices change much slower, usually by months, if not years.

Current Real Estate Market Summary

  • Interest rates remained low until the summer of 2022, but the cost of borrowing went up quickly in the latter half of the year.
  • During the pandemic, home price increases outpaced household income. Today, home prices are somewhat stable, though a few hotter markets during the pandemic are seeing significant declines.
  • However, year-over-year pending sales are down 37%.
  • In the last half of 2022, salaries have grown, but only modestly.

As you might have guessed, home affordability is out of whack now. Interest rates are having the most impact on the market; they have the most significant change in velocity right now among the variables that influence how much income is required to buy a house.

The likely near-term scenario is that home prices will decline until a balance among the variables is restored.

Below you will find year-over-year changes in the income needed to buy a single-family home in the United States, both by national average and among the top cities.

Salary Needed to Buy a Home in the Top 50 Cities

U.S. MetroQ3 2022 Mdn PriceIncome NeededQ3 2021 Mdn PriceIncome NeededY-O-Y Income Change
National Avg. $398,500 $105,248 $367,100 $76,698 $28,558
Atlanta $371,200 $98,037 $325,700 $68,041 $29,997
Austin $541,600 $143,042 $498,400 $104,119 $38,923
Baltimore $390,600 $103,161 $370,300 $77,358 $25,803
Birmingham $308,800 $81,557 $273,600 $57,157 $24,400
Boston $698,900 $184,586 $657,800 $137,418 $47,168
Buffalo $243,800 $64,390 $231,800 $48,424 $15,966
Charlotte $400,600 $105,802 $363,500 $75,937 $29,865
Chicago $349,400 $92,280 $337,800 $70,568 $21,711
Cincinnati $268,400 $70,887 $253,500 $52,958 $17,929
Cleveland $227,700 $60,138 $212,900 $44,476 $15,662
Columbus $312,100 $82,429 $286,300 $59,810 $22,619
Dallas $390,100 $103,029 $345,200 $72,114 $30,915
Denver $666,000 $175,897 $614,800 $128,435 $47,462
Detroit $266,000 $70,253 $259,500 $54,211 $16,042
Hartford $344,100 $90,880 $314,700 $65,743 $25,137
Houston $349,500 $92,306 $309,900 $64,740 $27,566
Indianapolis $301,400 $79,603 $269,000 $56,196 $23,407
Jacksonville $398,000 $105,116 $339,000 $70,819 $34,297
Kansas City $314,500 $83,062 $283,300 $59,183 $23,879
Las Vegas $463,500 $122,415 $411,800 $86,027 $36,387
Los Angeles $893,200 $235,902 $860,900 $179,847 $56,056
Louisville $263,800 $69,672 $245,500 $51,286 $18,386
Memphis $276,700 $73,079 $254,000 $53,062 $20,017
Miami $570,000 $150,542 $490,000 $102,364 $48,179
Milwaukee $358,300 $94,630 $333,000 $69,566 $25,065
Minneapolis $381,100 $100,652 $362,000 $75,624 $25,028
Nashville $408,300 $107,836 $355,400 $74,245 $33,591
New Orleans $278,900 $73,660 $275,400 $57,533 $16,127
New York $627,400 $165,702 $586,800 $122,586 $43,116
Oklahoma City $235,300 $62,145 $198,500 $41,468 $20,677
Orlando $425,000 $112,246 $365,000 $76,251 $35,996
Philadelphia $349,200 $92,227 $324,800 $67,853 $24,374
Phoenix $474,400 $125,293 $429,600 $89,746 $35,548
Pittsburgh $210,250 $55,529 $243,300 $50,827 $4,702
Portland $594,300 $156,960 $549,200 $114,731 $42,229
Providence $453,800 $119,853 $416,900 $87,093 $32,760
Raleigh $460,500 $121,622 $403,500 $84,293 $37,329
Richmond $384,100 $101,444 $355,300 $74,224 $27,220
Riverside $567,000 $149,750 $524,000 $109,467 $40,283
Sacramento $535,000 $141,299 $512,000 $106,960 $34,339
Salt Lake City $561,200 $148,218 $500,800 $104,620 $43,598
San Antonio $342,700 $90,510 $300,900 $62,860 $27,651
San Diego $900,000 $237,698 $850,000 $177,570 $60,129
San Francisco $1,300,000 $343,342 $1,350,000 $282,023 $61,320
San Jose $1,688,000 $445,817 $1,650,000 $344,694 $101,122
Seattle $741,300 $195,784 $708,400 $147,989 $47,796
St. Louis $256,800 $67,823 $235,700 $49,239 $18,584
Tampa $405,100 $106,991 $341,000 $71,237 $35,754
Virginia Beach $327,300 $86,443 $290,000 $60,583 $25,860
Wash. D.C. $581,300 $153,527 $548,600 $114,606 $38,921

Methodology

RubyHome’s analysis is based upon the following data and assumptions:

  • Quarterly median single-family home prices (NAR)
  • Mortgage rates: 3.10% in Q3 2021, 5.82% in Q3 2022, St. Louis Federal Reserve Bank
  • Loan: 30-year mortgage
  • Down payment: 20%
  • Debt-to-Income (DTI) Ratio: 28% (front end ratio)
  • Taxes: 1.25% of purchase price
  • Insurance: 0.5% of purchase price
  • Property type: Single-family home
  • Cities defined by Metropolitan Statistical Areas (MSAs): U.S. Census

Excluded:

  • HOA fees
  • Closing costs
  • Mortgage insurance

Additional data:

  • for Pittsburgh, we use data from Redfin

Post a Comment