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Real Estate

Even high-earners are feeling the pinch after housing affordability declines

In San Jose and San Francisco, working in the highest paid industry doesn’t mean you’ll be able to comfortably afford a median-priced home

In the second quarter of 2019, the median price of a single-family home in the U.S climbed to a record high, reaching $266,000. Not only was this a 10.8% increase from the previous quarter, but it was also up 6.4% from the same time period in 2018.

This growth, which has contributed to America’s lack of affordable housing, has become a cause of concern for homeowners and buyers belonging to every U.S. income bracket, especially those included in the nation’s low and middle-class segment.

“Now that the economic expansion is in its 10th year, some working- and middle-class Americans are finally starting to see wage increases significant enough to ready them buy their first homes,” said Daryl Fairweather, Redfin’s chief economist. “But economic growth is a double-edged sword for the housing market. The increase in demand for low- and moderately-priced starter homes is pushing up prices for the most affordable segment of the market.”

Fairweather said within the next few years, prices for the most affordable homes are likely to continue growing rapidly. This will eventually push homeownership further out of reach for America’s low- and middle-income population.

But how will this lack of housing affordability impact America’s high earners?

In order to gauge how working in a high-paying industry can impact one’s ability to afford a home, LendingTree ranked the nation’s 50 largest housing markets by how affordable they were to those working in the metro’s highest-paid industry.

According to the company’s data, homebuyers working in a metro’s highest-paid industry can afford home payments that are hundreds of dollars higher than those earning the metro’s median salary.

“On average, someone working in the highest paid industry in one of the nation’s 50 largest metros can expect to make over $900 more a month than what they would need to make to comfortably afford a median-priced home in their area,” LendingTree writes. “In only two of the nation’s 50 largest metros does earning the median salary for the highest paid profession in the area not make a median-priced home generally affordable.”

In these two cites, San Jose and San Francisco, working in the highest-paid industry doesn’t mean you’ll be able to comfortably afford a median-priced home.

“Even with a high-earning job, you’ll still struggle to afford housing in two cities — San Jose and San Francisco,” LendingTree writes. “In both San Jose and San Francisco, a median-priced home would cost an average of about $269 more than what someone earning a median salary in that metro’s highest-paid industry could afford.”

But while high paid earners in the West Coast may have a harder time affording housing, LendingTree indicates that median-income earners in the highest paying industries in markets like Houston, Detroit, and Washington, D.C. have the easiest time affording a median-priced home.

According to the company, in these three metros, median income workers earn over $1,300 more than what they need to afford a median-priced home. The top five include:

  1. Houston, Texas
  2. Detroit, Michigan
  3. Washington, D.C.
  4. Hartford, Connecticut
  5. Chicago, Illinois

The video below highlights the top 5 housing markets where housing is the most affordable to those employed in that metro’s highest-paid industry:

Note:  In order to determine the housing affordability of each metro, LendingTree calculated the likely monthly down payment for a median-priced home in a given metro, based on a potential buyers’ ability to afford a 20% down payment.

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