For years, I’ve been arguing that a simple, broken economics formula has put millions of middle-class Americans in a state of perpetual economic anxiety: Families with average incomes can’t afford average homes. In fact, families with really good incomes can’t afford average homes.
Here’s new data to support that claim.
An analysis of median income and median home prices I developed jointly with RealtyTrac Inc. has found that roughly 38 million Americans, or 1 in 8 people, live in a county where household income must exceed $100,000 to support a mortgage payment for an median-priced home.
In other words, families must earn six-figure salaries to afford what would be considered an average house or condo that was for sale in August.
In my series The Restless Project, I am examining structural causes of American anxiety. Many Americans today don’t see a clear path toward their future. Young married couples wonder if they’ll ever be able to afford a home; growing families have trouble finding affordable neighborhoods with good schools. Here is why: According to the analysis, some 80 million Americans live in counties where median income can’t support a monthly mortgage payment on a median-priced home.
In many places, the income required to buy even an average home seems entirely out of reach to most people. Some are easy to predict: San Francisco County, Calif., where the minimum income to support an average home is $240,000; or Westchester County, N.Y., where it’s $139,000. A series of big-city suburbs are also there: Fairfax County, Va., ($126K) and Falls Church, Va., ($158K) near Washington, D.C., and Nassau County, N.Y., ($104K) and Bergen County, N.J., ($101K), near New York City. But also making the $100K list is Blaine County, Idaho, ($115K) and Eagle County, Colo., ($116K).
For example: A buyer in Fairfax County can expect a monthly mortgage/taxes/insurance payment of $2,958 to buy an median-priced home at $532,000 there, assuming that buyer is ready to cough up a $53,000 down payment. Buy a home in a place like Fairfax or any of these counties with less than $100,000 income, and you’ll be house-poor.
Drop the income cutoff to $70,000, and the group of unaffordable counties expands to 58 million Americans, or roughly 20 percent. One in 5 people live in a county where household income should be at least $75,000 to afford an average home.
These house-poor counties include rural Snohomish County, Wash., along with Chester County, Pa., and Williamson County, Tenn.
Drop it further, to the actual U.S. median income of about $53,000, and you get a group of 204 U.S. counties where 91 million Americans live. That means 1 in 3 Americans live in a place where nationwide median income doesn’t support the purchase of a median-priced home.
It’s a little unfair to compare national income with local real estate prices, so RealtyTrac also helped me compare median county income with median home prices. After all, it’s a lot easier to come by a $100,000 income in Fairfax than Chester, Pa. But even adjusting for local salaries, the picture is still bleak. In 200 of the nation’s largest counties, encompassing 80 million people, median income is less than the income required to buy a median-priced home.
In Washington County, R.I., where home payments would be $1,945 on an median-priced $349,000 home, the minimum income required to buy is $83,000. In reality, median income is $72,000. That $11,000 gap is the punishing stress and restlessness I’ve described.
A few more examples:
Colfax County, N.M.
Median home price — $299,000.
Payment — $1,662.
Minimum income required to buy a median-priced home — $71,000.
Median income — $39,000.
Bennington County, Vt.
Price — $279,000.
Payment — $1,551.
Minimum income — $66,476.
Median income — $52,289.
King County, Wash.
Price — $396,000.
Payment — $2,204.
Minimum income — $94,000.
Median income — $70,000.