Financial experts generally recommend putting no more than 30% of your income toward housing. But for many Americans, that’s next to impossible — especially if they want to be homeowners.
Thank you for reading this post, don't forget to subscribe!Nationwide, Americans earning the median income need to spend 41.8% of their salary on housing to afford to own a median-priced home, according to a recent Redfin study. Redfin’s calculations assume a 6.72% mortgage rate and 15% down payment, and use household income data from the U.S. Census Bureau for 2023, adjusted for 2024 wage growth.
And in certain metros, that burden is even higher. In five California cities, homebuyers earning the local median income must put at least 67% of their income toward housing to afford a median-priced home — the most of anywhere in the U.S.
Here’s a closer look at each. Note that city rankings are based on the 50 largest U.S. metros, while national figures reflect the broader housing market through November 2024.
1. Los Angeles
- Share of median income needed need to buy a median priced home: 77.6%
- Median income: $92,994
- Median home sale price: $896,060
2. San Francisco
- Share of median income needed need to buy a median priced home: 76.2%
- Median income: $159,316
- Median home sale price: $1,513,699
3. Anaheim
- Share of median income needed need to buy a median priced home: 75.9%
- Median income: $121,925
- Median home sale price: $1,165,965
4. San Jose
- Share of median income needed need to buy a median priced home: 73.9%
- Median income: $169,663
- Median home sale price: $1,566,114
5. San Diego
- Share of median income needed need to buy a median priced home: 67.3%
- Median income: $108,115
- Median home sale price: $905,463
Home costs are high in these cities due to a longstanding housing shortage in California, especially in its largest metros. Strict zoning laws and high building costs make new construction difficult, while a strong job market and a concentration of wealthy residents has driven up demand, pushing prices even higher.
Los Angeles consistently ranks among the least affordable cities for homebuyers, with a home price-to-income ratio of 12.5, according to a 2024 analysis of Zillow home values. The other California cities listed above also have ratios of nine or higher — nearly double the national median of 4.7.
In contrast, Pittsburgh is the the most affordable metro, according to Redfin’s data, with a median-priced home costing just 25.3% of the local median income.
Want to up your AI skills and be more productive? Take CNBC’s new online course How to Use AI to Be More Successful at Work. Expert instructors will teach you how to get started, practical uses, tips for effective prompt-writing and mistakes to avoid. Sign up now and use coupon code EARLYBIRD for an introductory discount of 30% off $67 (+ taxes and fees) through February 11, 2025.
Plus, sign up for CNBC Make It’s newsletter to get tips and tricks for success at work, with money and in life.
