Rents and mortgage payments are sky-high in many American cities, pushing people of all ages away from downtown areas and into the suburbs or towards smaller, more affordable cities. But our understanding of what is ‘affordable’ might be seriously distorted, as nowadays you need to earn a six-figure income to be able to afford a home in popular cities like New York, San Francisco or Seattle. This got us thinking, has it always been this way? How much has the situation changed over the decades?
How Much Do You Need to Earn to Be a Homeowner—A 20-Year Analysis
We wanted to see how much you need to earn each year to be able to afford a single-family home or a one-bedroom apartment in the 50 most populous American cities—without spending more than 30% of your income on your mortgage. But we didn’t just look at the present situation; to get a picture of how the U.S. housing landscape has evolved we looked at 20 years’ worth of data, extracted from Zillow. For instance, you can compare what you need to earn to afford a home in 2019 to what you would need to earn back in 1999—and the differences are, in some cases, massive. In 1999, earning $76,414 per year would have been enough to land you a single-family home in San Francisco, while 20 years later, you need to earn $308,763 per year to make that happen. That's because the average price of a single-family home in the Golden City increased 304% over the past two decades, from $356,600 in 1999 to $1,440,900 in 2019.
Below you’ll find an interactive visual showing how much you would need to earn to be able to afford either a single-family home or a one-bedroom apartment in the 50 most populous cities in America. You can use the dropdown menu to select a city and see how much it would take to become a homeowner there, for each year between 1999 and 2019. The cities in the dropdown list are ranked by population, so if you want, you can just click the arrows to go to the next or the previous city on the list.
We also looked at how much you’d have to make to afford a one-bedroom apartment in these 50 major cities. Inventory remains tight for single-family homes, so prices are a lot higher in this category. Some potential homebuyers would also rather buy an apartment located close to the urban core, to avoid both a higher mortgage and a longer commute. Singles and young professionals are also more inclined to buy a one-bedroom apartment within a transit-oriented development that is close to entertainment, shopping and dining destinations. But while one-bedrooms are much less pricy than single-family homes, they are by no means cheap: you need to earn $189,364 per year to afford a one-bedroom apartment in San Francisco in 2019.
If You’re Going to San Francisco, Be Sure You Can Afford to Live There
San Francisco might not be the most expensive city in the world—it's not even one of the 20 most expensive cities in the world, according to a recent ranking done by The Economist Intelligence Unit (EIU), which placed it at #25—but according to our analysis, it’s the most unaffordable in the U.S., if you don’t want to spend more than 30% of your income on mortgage payments.
If you want to buy a single-family home in San Francisco, you need to earn $308,763 per year to keep your mortgage from taking more than 30% of your income. Median home prices in the city rest at $1.4 million, according to Zillow, while one-bedroom apartments sell for $883,700, making San Francisco more expensive than New York City and Los Angeles combined. And it’s been this way for the past 20 years, as San Francisco was the least affordable city in 1999 as well. Back then, you’d have needed to earn $76,414 per year to afford a single-family home, and $57,707 per year to afford a one-bedroom apartment. San Francisco is also one of the cities that saw the biggest jumps in home prices over the past 20 years; the price of a single-family home here is 304% higher today than it was back in 1999.
The numbers for San Francisco make the situation in New York City pale in comparison. Everyone is always talking about how expensive living in the Big Apple can be, but it turns out that prices in NYC are no match for those in California. While New York City office space might boast some of the highest prices in the world, it seems that, when it comes to housing, it’s no longer the show-stealer. The average price of a single-family home in New York City is currently $620,300, 132% below the average price of a San Francisco home. And while you still need to earn a six-figure income if you want to be a homeowner here, you don’t need to earn as much. If you want to buy a single-family home in NYC without being burdened by mortgage payments, you need to earn $132,921 per year, and if you’re looking to buy a one-bedroom apartment, you only need to make $52,007 per year. Average prices for one-bedroom NYC apartments for sale are lower than what they were during the financial crisis of 2008.
Check out the visual below to see the 10 U.S. cities that saw the highest increase in housing prices over the past 20 years. You can switch tabs to see the data for single-family homes or one-bedroom apartments and compare the average prices in 1999 to those in 2019. The cities are ranked according to the percentage increase in home prices.
As we already mentioned, San Francisco is currently the least affordable city in the U.S. for prospective homebuyers, with the average sale price of a single-family home exceeding $1.4 million. San Jose follows close, with single-family homes selling at an average price of nearly $1.2 million in 2019—257% more than what they fetched in 1999.
Washington, D.C., turns out to be the city that saw the highest jump in home prices over the last 20 years. In 1999, a single-family home here would cost you $138,100 on average; in 2019, home prices are 412% higher, resting at an average of $706,500. Prices in Oakland, Calif., soared 337% in 20 years—a single-family home here cost $177,200 in 1999, compared to $774,700 in 2019. The increasing number of government jobs will continue to push prices higher in Washington, D.C., while tech-savvy professionals will keep flocking to nearby Oakland as San Francisco becomes over-crowded –and super-expensive.
Not into Mortgage Payments? Consider Moving to These Cities
We also were curious to see which cities saw the lowest increases in home prices over the past two decades. As it turns out, Cleveland is the only city where the average price of a single-family home is lower today than it was in 1999. Back then, the average price of a single-family home was $63,600, while in 2019, that price is 14% lower, averaging $54,900. Cities like Memphis, Albuquerque, Wichita, and Columbus also saw modest gains in home prices over the years, making them a lot more affordable than top-tier cities like New York City or Los Angeles.
Check them out in the visual below, and switch tabs to see the prices for single-family homes or one-bedroom apartments.
It all depends on your needs and preferences. If living in a hip city that offers a plethora of job opportunities and entertainment options is a must for you, then you need to make sure you can afford living there, and maybe consider renting or giving up on space instead of buying a property. If what you want is to own your own home and the hip factor and location are not that important to you, then you might want to consider moving to a more affordable city like Philadelphia or Cleveland.
Thinking of Paying for a Home in Full? Here’s How Long You’d Need to Save Up
If you were to save 30% of the national median income every month to buy a single-family home in San Francisco and pay for it in full, it would take you 81 years to come up with that amount, based on 2017 data. If you picked San Jose, it would take you 62 years to save enough money, while in Los Angeles it would take 43 years. Talk about delayed gratification.
If the idea of saving up money for decades or giving up a big chunk of your income on mortgage payments each month is not appealing to you, and you’re not dead set on living in hip cities like San Jose, Oakland or NYC, then you might want to think of relocating. The American dream of owning a home is still within reach in a few major U.S. cities, including Cleveland, Oklahoma City and Wichita, Kan., where by saving up 30% of your income, you’d be able to afford to buy a single-family home in just three years.
Feel free to play around with the dashboard below containing all the data we used for this analysis. You can click on any city on the map to see the 20 years’ worth of housing data for both single-family homes and one-bedroom apartments.
We used Zillow housing data as a source to see the amount you need to earn to be able to afford to buy a single-family home or a one-bedroom apartment in the 50 most populous cities in the U.S. We added a 5% annual interest to a 30-year mortgage with no down payment and calculated the monthly rent for the price of the house at the end of the mortgage. We calculated how much you’d need to earn each year by not spending more than 30% on house costs, based on Census findings. The formula we used includes PITI (principal, interest, property tax and homeowner’s insurance) based on a recent HSH study.
We calculated how long it would take to save for a full house payment based on initial home price data from Zillow. The formula is based on national average wage data from the Social Security Administration, and it presents the number of years it would take to save for a full payoff by saving 30% of your annual income. The latest national average wage index available is for 2017.
The 50 cities are sorted in descending order according to population numbers.