Median Home Price vs. Pre-Tax Salary — 51 Cities in the United States
At Hestia Metrics we enjoy sharing interesting data points.
We have compiled a list of 51 cities, their median home sale prices and the pretax salary needed to afford those homes. We had seen some posts about post-tax income required to own homes in different cities. The only problem is, we have to pay taxes… so we decided we would find the pretax income necessary for a single individual and a married couple to own a home in each city.
M = Married Pre-Tax Income S = Single Pre-Tax Income
Pre-Tax Salary Needed to Afford the Median Home for 51 U.S. Cities
*See data table below
First and foremost, taxes are no fun, and the amount of house you can afford at a stable income (say 65k) varies wildly by city. Not only are there benefits to living in states with no state income tax (Tennessee), but on the flip side, you also have to watch out for extremely high effective real estate tax rates (Austin).
Best Bang for your Buck
To find ‘value’ cities where you can make the least amount of money and spend the most on a house, relative to other cities, take a look at the graph below. What we are looking for in the graph are cities that have a relatively high blue bar compared to the next four or five cities as you move left to right. The cities that stick out to us are as follows: Louisville, Las Vegas, Nashville, Pheonix and Virginia Beach. To drive this point home, we will compare Virginia Beach and Minneapolis, which both have a median house price of 231k. The difference between the two cities is 12k in income. A single person only needs to make 75k in VB compared to 87k in Minneapolis to afford the same priced house.
Top Cities To Move To
Right now: Austin, Charlotte, Nashville, San Fransisco and Atlanta are some of the hottest cities in the country, just to name a few. Although, it might be worth looking at the cost of living in these cities before you quit your job and make the move. San Fransisco topped our list as the highest salary required to buy a house. With the Median home price in the golden gate city topping 732k, which requires a 266k salary for a single person, you need to find a pretty sweet tech job to afford that.
Other interesting cities to look at are Charlotte and Nashville, both booming with newcomers. The music city and Charlotte are ripe for the picking. The median house price is relatively low at 209k and 197k for Nashville and Charlotte, respectively. These cities are ideal targets for income property.
There might not be a hotter city than Austin right now. With Austins unique music and laid back style, Millennials are flocking by 100+ a day to the city. Although, before you go and look at property in Austin, you might want to check out the real estate tax. The median property in Austin is 375k with an effective tax rate at 1.97%, your tax bill will be $617 per month, which is almost half of your mortgage!
Please add comments with your feedback, we love constructive criticism and ideas for future posts.
Median Sales — We took the Median selling price for Q2 2016 from Zillow’s data.
Mortgage Spend — We have seen some “rule of thumb” metrics for the amount of take home salary you should spend on a mortgage, we decided on 25%.
Loan — 80% Loan to Value.
Insurance — We used the state average insurance payment from Value Penguin
Pre-Tax Salary — The ADP salary calculator was used to goal seek the pre-tax salary needed to achieve a post-tax salary with a 25% mortgage rate. We assumed 0 allowances, no 401k and no other items taken out pre-tax. We rounded our pre-tax salaries to the nearest thousandth.