Housing affordability remains a growing problem across the country, according to a new study by mortgage resource HSH.com, which examined the 50 largest metro areas in the United States to determine the salary residents must earn to afford an average home.
According to HSH, a homebuyer needs to earn an annual income of $62,700 to afford an average home in the Chicago-Naperville-Joliet-Elgin MSA. The average price of a Chicagoland home last quarter was $255,600, making the monthly mortgage payment for someone who earns that much approximately $1,460.
Affordability has been somewhat improved by relatively low mortgage rates, but whether or not this offset will provide relief beyond 2017 is uncertain. While the majority of markets were less expensive than the previous quarter, 34 of the 50 markets saw annual home price increases of over 5 percent, while the average person’s income didn’t keep pace.
To calculate the salaries needed to buy a home, HSH considered average home price, anticipated mortgage rates and a down payment of 20 percent. Although the salaries required to buy homes decreased in the past quarter, they stayed relatively the same over the course of the year.
When the median costs in the third quarter of 2017 were compared to the same time in 2016, just one of the 50 metro areas saw a year-over-year decline. Hartford, Connecticut, with a mere 1.04 percent dip, was the only metro to experience a reduction. All other markets faced a year-over-year rise in price.
As income gains continue to slow, climbing roughly 2.5 percent annually, potential homebuyers have an increasingly difficult time keeping up. To contend with rising home prices, year-over-year wage gains must exceed 10 percent in nearly one-third of all metros.