In the Most Expensive Cities to Buy a Home, You Need a Salary of $100,000

Home prices have jumped since the real estate market crash during the Great Recession. Since the market bottomed in 2011, home prices have recovered nicely. They have recovered so nicely that in the most expensive cities to buy a home, many of us are now priced out.

In October of 2015, home prices surpassed the real estate bubble-era peak and have kept on climbing. Today, we find ourselves in a real estate market where the top seven U.S. metro areas require home buyers have a salary over $100,000 to buy a median-priced home.

Have home prices appreciated too much? Recently, there has been a trend of price reductions so we may be shifting from a seller’s market to a buyer’s market. Or the shift has started already.

How the Salary Needed Was Calculated

HSH.com published a report that we will be referencing that used the following criteria to determine the salary needed to buy a median-priced home. Here is how they arrived at the number for each metro area:

For our calculations, HSH.com uses the National Association of Realtors’ 2018 first-quarter data for median-home prices, national mortgage rate data derived from weekly surveys by Freddie Mac and the Mortgage Bankers Association of America for 30-year fixed rate mortgages and available property tax and homeowners insurance costs to determine the annual salary it takes to afford the base cost of owning a home (principal, interest, property tax and homeowner’s insurance, or PITI) in the nation’s 50 largest metropolitan areas.

We used standard 28 percent “front-end” debt ratios and a 20 percent down payment subtracted from the NAR’s median-home-price data to arrive at our figures. We’ve incorporated available information on property taxes and homeowner’s insurance costs to more accurately reflect the income needed in a given market.

7 Most Expensive Cities to Buy a Home

Not surprisingly, California is well represented in the most expensive U.S. metro areas list. In fact, the top four cities are in California. 

In the monthly payments below, we are including principal, interest, property tax and homeowner’s insurance, or PITI. Since this varies by city, even though a median home price is slightly lower, the PITI can be higher due to taxes or insurance rates. Here is a list of the seven most expensive metro areas starting from highest to lowest.

1. San Jose: $274,623.19

Median home price: $1,405,000
Monthly payment: $6,407.87

2. San Francisco: $213,726.86

Median home price: $1,070,000
Monthly payment: $4,986.96

3. San Diego: $130,986.05

Median home price: $645,000
Monthly payment: $3,056.34

4. Los Angeles: $114,907.52

Median home price: $557,200
Monthly payment: $2,681.18

5. Boston: $109,411.27

Median home price: $495,900
Monthly payment: $2,552.93

6. Seattle: $109,274.91

Median home price: $530,300
Monthly payment: $2,549.75

7. New York City: $103,235.16

Median home price: $410,500
Monthly payment: $2,408.82

25 Most Expensive Cities to Buy a Home

While the top seven require an income over $100,000, the remaining eighteen metro areas drop down to $60,911.75 in Orlando, FL. See the map below for a list of the 25 most expensive metros.

Do live in one of these cities or plan to move to one? Will this change your thoughts on moving or do you think the cost of living there is worth it? Have we reached a peak in the real estate market or is there more room to grow?

Let us know your thoughts below.