Potential homebuyers in the DC metro area need to earn an average annual salary of nearly $82,000 to afford to buy a median priced home in the area, according to a new study released last week by online mortgage researcher HSH.com.
HSH looked at 27 US metro areas and calculated the annual before-tax income required to cover the mortgage’s principal, interest, tax and insurance payment. It used standard 28 percent “front-end” debt ratios and a 20 percent downpayment subtracted from the median home price data to arrive at its numbers.
Loans with less than a 20 percent downpayment will incur mortgage insurance, which would in turn increase the required salary.
For its study, HSH used the NAR’s 2016 second-quarter data for median home prices and its 2016 second-quarter average interest rate for a 30-year, fixed-rate mortgage.
In the DC metro area, the median home price is $406,900. Based on that figure, the average yearly salary required to afford a home is $81,940.22. This represents a quarterly increase of $4,782.32 over the previous quarter.
Monthly payments in DC are estimated slightly below $2,000 per month. Buyers putting only 10 percent down would need to earn nearly $96,000 per year to purchase a home.
These figures placed DC seventh overall in the study, behind other even less affordable metros — San Francisco, San Diego, Los Angeles, Boston, New York and Seattle.
San Francisco remains the least affordable US metro, where potential buyers need to earn an estimated annual salary of $161,947.60 to afford a home there, representing a quarterly increase of nearly 15 percent, and an almost 10 percent increase year-over-year. Median home prices in San Francisco top out at $885,600.
Pittsburgh, on the other end of the spectrum, ranks as the most affordable metro where potential buyers need to earn $32,390.09 yearly to afford a home. The median price of a home in Pittsburgh is currently $140,500.
Only 3 of the 27 metros studied — Tampa, Orlando, and Miami — became more affordable during the second quarter of 2016.
Mortgage rates fell in every metro on the list, according to HSH.
You can see the HSH report on all 27 metros here.