Here's What It Takes to Buy a Home in the Biggest U.S. Cities

HSH.com tells us how much you need to earn to afford a home in or near America's 27 biggest cities.

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Anyone with a hefty bank account has always been able to buy an urban palace. But if you're of more modest means and want to live in or near one of America's biggest cities, your might think your choices were between an apartment or a park bench.

Not at all, according to HSH.com, which recently updated its list of the salary you must earn to buy a home in 27 metropolitan regions. Using its own data on mortgage rates, as well as information from the National Association of Realtors, the site details just how much income it takes to afford the median-priced home in each area. The numbers range from little as $29,788.67 to as much as $137,129.55. Here's the list:
  1. Cleveland: $29,788.67
  2. Pittsburgh: $30,177.78
  3. St. Louis: $31,275.49
  4. Cincinnati: $31,850.18
  5. Detroit: $32,250.30
  6. Atlanta: $34,183.44
  7. Tampa, Florida: $36,437.56
  8. Phoenix: $41,308.74
  9. Orlando, Florida: $43,243.95
  10. San Antonio: $44,506.00
  11. Minneapolis, Minnesota: $45,732.39
  12. Dallas: $47,708.77
  13. Houston: $49,036.60
  14. Philadelphia: $50,546.25
  15. Chicago: $52,866.88
  16. Baltimore: $53,078.51
  17. Sacramento, California: $58,113.87
  18. Miami: $59,734.23
  19. Denver: $59,892.46
  20. Portland, Oregon: $60,307.71
  21. Seattle: $73,851.06
  22. Washington, D.C.: $78,503.56
  23. Boston: $79,820.01
  24. Los Angeles: $85,964.88
  25. New York: $89,788.69
  26. San Diego: $98,534.22
  27. San Francisco: $137,129.55
To calculate those salaries, HSH started with NAR-reported home prices from the first quarter of 2014. These are median prices, with as many homes in the metropolitan area costing less as cost more.

From there on, it's all reverse engineering. HSH subtracted a 20 percent down payment, and then used regional prevailing area mortgage rates to determine monthly payments. Then the site used a "standard" 28 percent front-end ratio, according to vice president Keith Gumbiner. That's the maximum portion of your monthly gross income you should spend on housing, he said.

HSH divided the monthly home payment by 0.28 to get the minimum necessary monthly gross income. Multiply by 12, and you have the baseline annual income to reasonably pay for the dwelling.

Depending on which city you live in -- or move to -- a fairly modest household income could pay for an average home you call your own.

Now, It's Time for the Catches

1. The down payment.
"More is always better," Gumbinger said. Although HSH used the traditional 20 percent figure, "in most marketplaces, you can obtain financing for 10 percent down," he said.

That's a far cry from the no-verification, little-to-no-money-down days before financial crisis, but then, there are excellent reasons why the word "housing" was paired with "bubble," "crash" and "meltdown."

The impact of a smaller down payment can be considerable. Take this case on the DailyFinance True Cost of a Mortgage calculator: $250,000 house, 30-year 4.5 percent mortgage, $3,000 annual property taxes and $1,000 annual insurance payment. With $50,000 -- 20 percent -- down, the total monthly payment is $1,346.70.

Drop the down payment to $25,000, or 10 percent, and your lender will likely make you pay for private mortgage insurance as well. PMI helps cover the lender's possible losses if you default.

Depending on the size of the down payment and loan, PMI rates can run between 0.3 percent and 1.15 percent, according to Bankrate.com. Let's assume 0.5 percent, which is $1,125 a year. Now you're spending $1,567.13 a month. With 5 percent down ($12,500), that 0.5 percent PMI rate, if you can get it, becomes $1,187 a year, and your monthly nut is $1,635.63. By dropping the down payment to 5 percent, you've tacked on an extra $288.93 a month, or nearly $3,500 a year in after-tax income you'd need.

2. Other expenses. Owning a home includes more than promptly paying the bank and local taxes. If anything goes wrong, you're on the hook. That includes a roof that even in the 1990s saw better days, pipes that burst during the winter because of the broken furnace and the stove that is now on permanent vacation.

A homeowner should expect to pay between 1 percent and 4 percent of the value of their home in annual maintenance and repairs, according to U.S. News & World Report. For that $250,000 home, that's $2,500 a year, or $208.33 a month.

3. Location. A median price is unlikely to land you in prime territory -- a desirable school district, close to basic amenities, or offering a great view -- particularly as the numbers are for Metropolitan Statistical Areas, a federal designation that can cover a lot of area.

According to information the NAR sent to DailyFinance, "New York" is New York City, Long Island, plus suburbs in New York State and North Jersey. If you work in Manhattan, that could translate into a massive daily commute if you have to go far enough out to find that median home price. But wherever your home is, you're also not going to have to worry that a landlord might kick you out to turn the apartment building into a condo.

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thefacts22

That median price calculation is wrong,i can assure you all that 59.000 will not buy a house or even a town house in a desirable low,low crime area in Miami,or anywhere in South Florida..The fact is that South Florida is the point where European and south American millionares buy luxury condos and mansions.In the real market,it will be a minimum of 500.000 to live in areal good section

May 27 2014 at 7:44 PM Report abuse +1 rate up rate down Reply
BARRY AND KATHY

In 1989, I had to move to N Y for a job and when searching for a home to rent, looked at one for which they were asking $1000 a month. There were literally WEEDS growing on the inside of the baseboards in the living room.
Another one was more expensive and they expected ME to finish the remodeling they had started. At MY expense. The Kitchen wasn't finished and had no appliances or finished floor.

May 27 2014 at 6:12 PM Report abuse +1 rate up rate down Reply
1 reply to BARRY AND KATHY's comment
thefacts22

NYC is fast under way to become another Detroit

May 27 2014 at 7:45 PM Report abuse -2 rate up rate down Reply
gamay9

Too many nice, large cities with major professional sports teams are missing from the list, most notably, Milwaukee, New Orleans, Memphis, Nashville, Charlotte, Oklahoma City,....and, secondary pro sports teams.... Austin and Omaha. If a city has major league pro sports teams, it is a major city.

Not including these fine cities skews the survey. For example, Austin is near Dallas, but has a much lower crime rate, far more culture and lower housing costs. Milwaukee is 90 miles from Chicago but has much more character, lower crime and lower housing costs. Chicagoans flock to Wisconsin for holiday (as they say in Europe). I'm sure Austin, Milwaukee and Memphis have a larger metro area than Tampa, Cincinnati and Portland. OKC and Omaha are growing leaps and bounds because they are very nice cities. Minneapolis always gets in these surveys and is full of Somalian pirates. St. Paul is never mentioned.

Therefore, your article and survey is prejudicial and you will have to answer to Al Sharpton and Jesse Jackson.

May 27 2014 at 10:57 AM Report abuse -1 rate up rate down Reply
3 replies to gamay9's comment
Papa

San Jose is bigger in both population & area than San Francisco yet not on the list.

May 27 2014 at 7:10 AM Report abuse rate up rate down Reply
1 reply to Papa's comment
gamay9

Papa: I forgot San Jose. Sorry. Read my post. There are many fine, large, major league cities omitted, which skews the results. San Jose may not have a MLB, NFL or NBA team, but they lead the nation in computer science and intellect, which is more important.

May 27 2014 at 11:00 AM Report abuse rate up rate down Reply