Two Middle-Class Incomes Don’t Add Up To a Home

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A family with two middle-class incomes can’t afford a median-priced home in most of the largest U.S. cities, according to a Redfin analysis of affordability based on list prices and median incomes. Home prices, which have seen two straight years of 13 percent increases, are rising again this spring. Meanwhile, median household income, when adjusted for inflation, is almost unchanged from 25 years ago. At the intersection of this stagnant wage growth and housing market rebound is the middle-class homebuyer, who also has few homes to choose from thanks to a five-year low in inventory. From a first-year elementary school teacher to a tenured college professor, homebuyers are finding few affordable homes for sale.

Based on non-distressed homes listed on the Multiple Listing Service (MLS) as of March 30, 2014, and 2012 salary data from the Bureau of Labor Statistics (BLS), just 41 percent of homes currently for sale across 40 U.S. cities are affordable for a family earning two median incomes. An affordable home is one for which the monthly payment is 28 percent or less of gross monthly income.

Percentage of Affordable Homes Across 40 Cities for Select Salaries and Occupations
One median salary 10%
Two median salaries 41%
One professor salary 50%
One engineer salary 57%
One management salary 70%
One doctor salary 86%
 

Home Purchase Affordability By City and Occupation

The chart below breaks down affordability across most of the largest cities in the U.S. We’ve indicated the percentage of homes currently on the market that are affordable for each city and occupation, based on BLS salary information. Blue means there are more affordable homes, while red means there are fewer. Not surprisingly, a doctor’s salary can afford most homes in most cities, while one median salary can afford very few homes in any city.

CityAffordabilityVisualizationInterpreting the Chart: A Look at Professors in Two Cities
Here’s a breakdown of the chart, using one job — professor — to highlight the differences in affordability by geography. A professor with the median $76,000 salary in Richmond, Virginia, can afford 88 percent of homes currently for sale. The city, which is home to Virginia Commonwealth University and University of Richmond, has a median home price of $219,000. On the other end of the spectrum, San Jose professors, with a median salary of $70,000, will find just 3 percent of homes are affordable. In the San Jose area, with universities such as San Jose State and Stanford, the median home price is $799,000.

Places and Professions with Affordability

While the overall picture is not great for housing affordability, there are exceptions. More affordable places are scattered throughout the country, although generally not on the coasts. Two middle-class incomes can afford a decent share of homes in Hartford (78%), Richmond (71%), Philadelphia (61%), Atlanta (59%), Minneapolis (56%) and Raleigh (55%). Affordability for specific occupations include:

  • Managers can afford 93% of homes in Hartford.
  • Doctors can afford 98% of homes in Raleigh.
  • Engineers can afford 79% of homes in Tucson.

Low Affordability Acute in California and Beyond

California has always been a popular place to live. So it goes that in every California city, two median incomes will not allow you to buy the median-priced home. But home affordability for two middle-class incomes isn’t just a problem in the Golden State. Few homes are affordable on these two incomes in Miami (19%), Long Island (24%), Denver (23%), Austin (32%) and Portland, OR (40%), indicating the problem reaches all corners of the country.

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Tommy is a Real Estate Data Analyst at Redfin in Seattle. He brings interesting information and insights to home buyers, sellers, owners, as well as industry experts. Throughout his career working in the real estate and analytics, he's never met a number or chart he didn't find interesting. Tommy grew up in Atlanta, GA and earned a degree in Computer Science from Georgia Tech. With his wife and two kids, you can find him on the Burke-Gilman Trail biking through Seattle, or hiking up in the Cascade Mountains.

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