Despite home values climbing for years, the median home in 36 of the country’s 50 largest metro areas is theoretically affordable to households that earn the typical income associated with attaining only a high school diploma. In one market — Oklahoma City — even that degree is not necessary for a household to afford the median-valued home.

In nine additional metro areas — including some of the priciest markets in the country — the income level that generally comes with an associate’s degree puts a household into homeownership territory: Boston, Denver, Miami, New York, Portland, Ore., Riverside, Calif., Sacramento, Salt Lake City, and Washington, D.C.

That doesn’t mean all homes throughout those metro areas are affordable to all households with those degrees. Rather, the mortgage payment for a median-valued home in a given metro area is considered “affordable” — it does not consume more than 30% of income — for a household making the typical salary of a household with those degrees.



These ratios also do not take into account the hurdle of saving up an adequate down payment, which can currently take seven years or longer in many areas and takes longer today than it used to in past decades. The hurdle can be especially hard to clear for renters who must save a down payment while paying 27.8% of their income on the national median rent, and even more in many pricey metros. Still, it’s encouraging news considering that home values climbed consistently from early 2012 through early 2019.

A mortgage on the typical U.S. home consumed just 16.8% of the country’s median household income in the first quarter, down from 17.6% in the fourth quarter 2018 and below the 21% average from 1985 through 1999. All those ratios are well below the long-standing rule of thumb that says housing should cost no more than 30% of a household’s income.

A big reason affordability has improved even as home values have risen is because mortgage interest rates — which go a long way in determining monthly payment amounts — have been at historically low levels for several years. Additionally, income growth has been relatively strong for much of the past year, after growing very slowly for several years.

Rent affordability also is easing, thanks to income growth recently outpacing rent growth — although potential home buyers still have an advantage (renters get no benefit from rock-bottom mortgage interest rates). Nationally, a median-income household could expect to spend 27.8% of its income on the median rent in the first quarter, down from 27.9% in early 2018, 28.4% in early 2017 and 29.2% in 2016. That’s especially important in light of new research that shows that communities where people spend more than 32% of their income on rent can expect a rapid increase in homelessness.

The most discouraging affordability news features a handful of West Coast markets:

Homeowners in the San Jose, Calif., San Francisco, and Los Angeles metro areas need the advanced incomes associated with advanced degrees (JD, PhD, Masters, etc.) to afford the typical mortgage payment.

Income commensurate with a bachelor’s degree is necessary to do the same in the San Diego and Seattle metros.

Methodology

Match median mortgage payments for Q1 2019 to the most recent American Community Survey incomes for each educational degree level. Because the most recent available ACS data is from 2017, these incomes are inflation-adjusted to 2019 dollars for Q1. A metro is considered affordable for an educational degree level if the following is true:

Thirty percent of the median household income where the highest level of education of each of the following individuals in the household is greater than or equal to the typical mortgage payment for that metro:

Household head Spouse Unmarried partner Housemate/roommate (only included among renters)

Sources