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Americans Must Earn $114,000 a Year to Afford a Typical Home
- vikramkr 3y agoI don't think that's a super useful number since if you're somewhere where it's easier to earn that amount, homes are likely gonna be more expensive. It would be much more interesting to know how far short the median income falls of median income needed to afford a home in that same region the income is earned - I think that's more insightful for an overall picture of how affordable houses are and you could do region by region comparisons. I would hypothesize that even though the median income might be above that threshold or close to it in some regions like Manhattan and parts of the bay, the affordability gap would actually be greater in a large number of those relatively higher income regions than relatively lower income regions elsewhere
- joe_the_user 3y agoIt's not a useful if you're prospective home buyer in a region but it's a reasonable illustration of how generally unaffordable housing has become.
- vikramkr 3y agoUnfortunately there's a really high risk of issues like Simpson's paradox when you average together distinct populations like this, meaning the combined statistic/insight could actually be showing the opposite of the experience you're likely to experience within each region. No home buyer isn't part of a region. Given that where you buy a home and where you live are very highly correlated, it's hard to tell if this is over or under stating the actual average experience. Your actual experience of housing affordability is regional not global. In this case my hypothesis is that this number is actually an underestimate of how unaffordable housing is, though for all we know it could be that some significant regions like rural regions are more affordable. There's no way to tell from this number alone.
- FireBeyond 3y agoEffectively, you need to be earning nearly twice the median household income[1] to afford a house. Our economy is deeply broken. [1] Just under $71,000/year as of 2021.
- over_bridge 3y agoThis is the trend everywhere in the Western world. At some point we need to think about what all those countries have in common and start making strategic choices to move away from it (hint: it starts with Reagan, Thatcher and other local equivalents in the 80s)
- drewcoo 3y agoNeoliberalism in the Presidency here in the US started with Carter, a.k.a. "The Great Deregulator" in the 70s. And it wasn't just adopted/pushed by one political party . . .
- crooked-v 3y agoIt's not really the economy in general. It's just cities. Most major US metro areas have under-built housing compared to demand every decade since the 1970s, and all of it is entirely self-inflicted through zoning and permitting. The only real hope of progress here is for states to start outright overriding local laws around housing, as California has been increasingly doing.
- bugglebeetle 3y agoThe laws that have been passed in California will not have any meaningful impact on affordability, so I wouldn’t look to them for hope or progress. It would take decades and decades of building at a level not seen since the postwar era to undo the damage done to the state by real estate speculators and Proposition 13.
- crooked-v 3y agoNothing is going to instantly change housing availability, but shrugging and giving up now will make things way worse in those future decades.
- nine_zeros 3y agoYes, I'll earn $114k in NY to be able to afford a home in Alabama.
- xboxnolifes 3y agoThe state, or the city? Because the state has a lot of affordable housing.
- JumpCrisscross 3y ago> I'll earn $114k in NY to be able to afford a home in Alabama I'm seeing 512 1+ bedroom apartments in Manhattan for sale at $576,000 or less (4x $114k) [1]. [1] https://streeteasy.com/for-sale/manhattan/price:-576000%7Cbeds:1-2 https://streeteasy.com/for-sale/manhattan/price:-576000%7Cbe...
- thelastgallon 3y agoA typical home in Wyoming or Iowa, yes. In bay area, LA and nearly all metros where >80% of people live, no.
- jabroni_salad 3y agoTyranny of averages... You can buy a home on way less than that here in Iowa. If you're renting here it's because you're planning on moving sooner rather than later. DSM is pretty affordable but I'm 2 hours out and it's even better. Maybe that figure would make sense in MPLS.
- bugglebeetle 3y agoAnd if you lose the one tech job available in Iowa, how do you pay for your house?
- AnimalMuppet 3y agoIf you lose your job, then you look around, and you discover that there is in fact more than one tech job available in Iowa. I'm not sure why you're fear mongering, but stop.
- bugglebeetle 3y agoI’ve just had a lot of friends who got sold the bill of goods of “move out to [insert Midwestern state] it’s so much cheaper and everyone is nice” only to get trapped in toxic, underpaying workplaces with nowhere to go. The ones that have families tend to just suffer through it and the ones that don’t end up back in big metros within a few years. And before you think I’m some coastal elitist, I was born and raised in unincorporated farm country. I just also know the realities of the job market.
- jabroni_salad 3y agotech-company tech-jobs sure. Iowa has an outsized financial sector and they all use computers. Lots of opportunity if you are willing to do some client serving as well, all my clients are complaining about how scarce labor is and im billing them dry in the meantime. If FIs decide they hate me I know enough JD Edwards to consult in that realm instead.
- thelastgallon 3y agohttps://archive.ph/9hmxF https://archive.ph/9hmxF
- karaterobot 3y agohttps://archive.ph/9hmxF https://archive.ph/9hmxF That number seems really low. Here in Seattle, the median home price is $804k, and a third of that is about $268k. I'm ignoring the down payment, but you get the idea. And we're not the most expensive market by any means. If this number is an aggregation, I guess that's somewhat better news for people outside the cities. And by outside the city, I mean 2-3 hours by car. Just moving to the next county isn't enough. I also wonder what they mean by a "typical" home. Do they mean typical in terms of price, regardless of square footage or unit type, or do they mean "typical" in the sense of a 3/2 single occupancy dwelling with a certain square footage and yard size, etc.?
- karaterobot 3y agoIf you factor in a 20% down payment, it's $192k/year, for the record. But you would need $160k in the bank for that down payment.
- thelastgallon 3y agoSince 1965, home prices have increased 7.6x faster than income: https://www.realestatewitch.com/house-price-to-income-ratio-2021/ https://www.realestatewitch.com/house-price-to-income-ratio-...
- api 3y agoTo understand this, understand that to older homeowners and a significant slice of the financial industry this is a huge success. To everyone else it's a disaster.
- layoric 3y agoAbsolutely, same here in Australia. Using markets as a mechanism for price discovery (what they are good at) for a necessity has gone predictably badly. Yes, people will put themselves in huge amounts of debt for a secure living situation, shocking I know.. /s.
- api 3y agoI don’t know about Australia but the real problem in the US is that the aforementioned interests (homeowners, speculators) have acted effectively like a cartel to restrict supply. They do this by pulling out every possible objection to block construction permits. Price signals work if supply can raise to meet demand. When house prices go up it becomes more profitable to build, etc. But when the supply side mechanism is blocked for a necessity then prices will just go up, and up, and up… especially if it can also be bought on leverage.
- rootusrootus 3y agoIt helps to also look before 1965. Right about 1970 or so was a very low point in the ratio of income to home price. It was higher before then, and since. If you look at the early 1970s as abnormal, then 4x is a pretty good estimate of the long term average. It's higher now, and was higher in 2008, but it's correctable.
- WarOnPrivacy 3y ago
- missedthecue 3y agoThis seems... very achievable if you're a dual parent household. Which most Americans families are. $57k per person? That's median income for full time workers.
- coldbrewed 3y agoIf you're a dual income/parent household, you have to afford both the house payments and childcare; typical child care costs can be so great that it makes sense for one parent to drop out of the workforce to care for children so you're back at square one with a single income household. At a median income of $57k your options are house XOR children which does a decent job of explaining why we're seeing birth rates plummet.
- deleted 3y ago[deleted]
- missedthecue 3y agoYou only have to pay childcare if you have kids, and if you have them, it's a temporary expense for the first few years until they are in school. People online act like you gotta pay childcare for the rest of time once you have a baby.
- salamanderss 3y agoIt's so awesome society cares so much about kids they'll toss you in jail for leaving them in the car while you run in the gas station to pay, but they won't lift a finger to contribute to the future tax slaves until they're five. Society in its sick tragedy of the commons war against parents want to get all the tax generation rewards with none of the risk and the minority of the investment.
- missedthecue 3y agoYou might be from another country, but in the US there are very generous tax credits (better than deductions) for people with children. It doesn't make children free or profitable, but it's unfair to say "society doesn't care".
- deleted 3y ago[deleted]
- salamanderss 3y agoVast majority of skilled workers can live in a shoebox in some high CoL area with jobs until they come up with enough for say a 60k Clayton Homes mobile plus land in some podunkville where wiping asses at the one old folks home job will cover utilities and property taxes. This is pretty much how I managed to afford a house when corona/fed blasted everything to oblivion...
- Brystephor 3y ago> Homebuyers needed a $114,000 salary to afford a typical home in September — assuming a 7.2% mortgage rate with 20% down on a median priced home of $412,001 — according to real estate brokerage Redfin Corp. Interesting. I wonder what it is for Seattle then. > The median listing home price in Seattle, WA was $829K in September 2023, trending down -2.5% year-over-year. The median listing home price per square foot was $584. The median home sold price was $799.5K. Says redfin (https://www.realtor.com/realestateandhomes-search/Seattle_WA/overview https://www.realtor.com/realestateandhomes-search/Seattle_WA...). Seattle median household income is ~115,000 according to Seattle times (https://www.seattletimes.com/seattle-news/data/seattle-median-household-income-hits-115000-census-data-shows/ https://www.seattletimes.com/seattle-news/data/seattle-media...). This means that one of the highest earning cities in the U.S. isn't able to comfortably afford a home, even at median prices. So then I wonder how many people are moving into Seattle with high incomes in order to buy homes and such. It's also very surprising to me that the median home sold price in Seattle is more than New York City.
- Enginerrrd 3y agoI think you can just roughly double the salary there. i.e. to afford a home roughly twice the price of the median in that analysis, it would take ~$230k salary to afford a home in Seattle. My wife and I combined make about that, and that seems about right. Though, IMO the debt-to-income ratios that they consider "normal" for these types of analyses leave one further extended than I'd like to be. (Childcare isn't cheap!)
- GloriousKoji 3y ago> It's also very surprising to me that the median home sold price in Seattle is more than New York City. Surprised me too but then it seems more reasonable when you see media listing home price per sqft in New York is $780 compared to Seattle's $584. New Yorkers are just buying smaller places.
- aaronbrethorst 3y agoeven at median prices Given current interest rates, an American getting a mortgage today is going to be paying something like $2,000/month more just in interest than they were in early 2021, which is when I bought my house in Seattle. At $799,000, you're looking at a monthly payment around $5,800/month. The definition of being cost-burdened on housing is when you spend more than 30% of your gross income on housing. That means you'd need a gross monthly income of $19,333 or $232,000 annually to not be rent-burdened in Seattle buying a median priced home.
- rmah 3y agoPeople have been complaining on HN that "houses are too expensive to buy" almost since it started 15 years ago. Yet 65% of Americans currently own their own homes. This is not as high as the peak in 2005 of 69%, but higher than the low in 2016 of 63% [1]. And IIRC, home ownership rates are near historical highs. Home ownership rate was almost always below 50% before ww2 and rarely exceeded 65% until the housing bubble of 2000-2010 [2]. The simple fact, as unpalatable as it may be, is that buying a home is always "expensive". In the US anyway, the price seems to be set by people's income. That is, their ability to pay. What does change is the size and quality of the homes. [1] https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N [2] https://www.getrichslowly.org/homeownership/ https://www.getrichslowly.org/homeownership/
- all2 3y agoOwnership? As in they hold the title? Or they are in a rent-to-own relationship with lenders?
- tsunamifury 3y agoYou must have failed stats class. The cohorts are all that matter here... so do the incoming cohorts own less than the older cohorts at their age. The answer is YES by a great deal!
- quantified 3y agoFwiw the St Louis Fed data doesn't show much widening of the gap: [https://www.census.gov/housing/hvs/data/charts/fig07.pdf https://www.census.gov/housing/hvs/data/charts/fig07.pdf] I'd like to find the definition of the measure, it may or may not be commonsense. For example, the unemployment rate does not track the count of unemployed people.
- chaps 3y agoThat chart clusters under 35 into a single group, which isn't helpful here. The closest actual range, of 35-45 has dropped a bit under 10% percent in that timeframe. Additionally, 35-45 has flipped from being a higher percent over the overall US to lower starting in the late 90s.
- thelastgallon 3y agoHome prices are ~50% more than pre-covid, yet homeownership is growing: https://www.census.gov/library/stories/2023/07/younger-householders-drove-rebound-in-homeownership.html https://www.census.gov/library/stories/2023/07/younger-house...
- whyenot 3y agoHere I sit as an employee of the State of California, at the top of my profession, at the top of my salary band... and living in the Bay Area, if I didn't have supplemental income I couldn't even afford to buy a new car. This isn't a "woe is me" statement, I love my job, have other sources of income, and will be fine. Many of my coworkers are not so lucky. Our comically ineffective union just negotiated a new contract with a 10% raise over 3 years. That will likely be less than inflation. Public employee job postings stay open for months because it is so difficult to recruit anyone. More and more people move into private industry where they do little to serve the public but are more fairly compensated. More broadly, in the Bay Area, there are a small group of professionals who make a decent salary, and then there is everyone else. Something has to give eventually. I worry what that will look like.
- chaps 3y agoHow much do you make per year, excluding your other sources? And what kind of car are you talking about?
- thelastgallon 3y agoState employees get pension. The pay raises are guaranteed every year. No risk of layoffs. If you started early, you can retire by early 50s. The pensions are worth a ton and stability is guaranteed for retirement. I read a recent article, Govt employee, about 120Kish in income, can retire at 52 years with really good pension, the equivalent of having 6 million in the bank.
- clipsy 3y ago> can retire at 52 years with really good pension, the equivalent of having 6 million in the bank. I'd love to see the math on this claim.
- syndicatedjelly 3y agoThat’s assuming one lives to the age of 200 years old
- deleted 3y ago
- cooper_ganglia 3y agoI earn 1/3 of that per year; My gross pay is less than $40,000/yr. If a "typical home" is too expensive for you to afford, the easiest, most commonsense answer is to move to LCOL with "atypical homes". Housing prices will fall in densely populated areas accordingly. I'm in my 20s. I own my home and car. I make enough to pay my bills, live comfortably, and still have money being put towards savings and investments. I couldn’t support a family on my salary, but I can support myself just fine, with money left over. Yes, you will take a pay cut. Yes, the work may be different. But you have work/life balance, housing is affordable and a realistic goal for young people, and every time you drive past a stranger on a gravel country road, they always wave at you. The people are literally golden-retriever-level friendly and very wholesome. And the food? Oh my god, don’t get me started on the food! Forget having lots of restaurant options, because you won’t need ‘em. We’ve got little old Baptist ladies, and they want their food to send you straight to heaven. I once mentioned offhandedly that I’ve been craving chicken and dumplings, and the next day, a little old lady at work brought in an empty 1-gallon ice cream container of fresh chicken and dumplings. You can’t beat southern hospitality! I realize uprooting your life and moving from the city to a rural area isn’t a realistic thing for many, if not most, people, but I promise you that if you can, your life will be better because of it.
- crooked-v 3y agoConsidering the active hostility of many places towards minorities, I have to wonder how well that wholesomeness holds up towards people who don't already look and act like the local community.
- cooper_ganglia 3y agoWhile it’s definitely not nonexistent, it is certainly very overstated. The loud voices get amplified the most, and that’s unfortunate. Personally, I think there’s very little “active hostility” here anymore, but racism is still present in subtler ways, like ignorance or insensitivity, simply because most of the people have lived here their whole lives, there’s few non-white people, and haven’t had much cross-cultural experience. There isn’t malice so much as ignorance, but there’s less and less as time goes by. My workplace’s racial makeup is majority non-white, and all of these people are very happy to have moved their families here, even if they weren’t at first. We have a New York City transplant who had a tough time transitioning, but she came around! She hated that the closest club was 40 minutes away, lol As long as you’re kind, respectful, and especially if you’re willing to attempt local culture (ever tried shooting a pound of Tannerite from 100 yards, just blowing shit up for fun? lol), 98% of people here in the south (in my southern area, at least) will welcome you with open arms. Especially those old ladies, they just want to feed you! :)
- m3kw9 3y agoDepends on how much savings you have and how fast the house is raising, you cannot just say 114000 like a magic number. Likely another 10-20 important factors to know if you can afford a house.
- deleted 3y ago[deleted]
- tuatoru 3y agoThe parents of the Baby Boomers had affordable housing, about three times median male income for a single family home. That was when fertility was last above replacement level. House-price-to-income started rising in the late 1960s and has not stopped. This problem will self-correct in the long run. There will be fewer people than houses. 1. https://population.un.org/wpp/Graphs/Probabilistic/FERT/TOT/840 https://population.un.org/wpp/Graphs/Probabilistic/FERT/TOT/...
- AnimalMuppet 3y agoSo don't buy a typical home. My niece just bought a condo for $200k. It's not a "typical" home; it only has two bedrooms. But they can afford it on much less than $114k/yr.
- Simulacra 3y agoIf true, and it's kind of hard to believe, that represents a significant hike. In 2016 I was making $55,000 and qualified for a $206,000 home with zero down.
- Saphyel 3y agoWhich part of America?? in Peru? el savador? Canada? Haiti ? Nevada?