Earning Enough to Afford Your Lifestyle

Housing costs in major metropolitan areas make it tough to make ends meet.

Where you live can have a significant impact on your ability to maintain a stable budget so you can avoid debt problems and reach your financial goals. Income levels are often at least partially determined by where you live, such as being in a “right to work” state versus a state with a unionized workforce or working in a rural community versus a major metropolitan area. At the same time, housing costs also vary largely by location – some places are just more expensive to live in than others.

With that in mind, the mortgage experts at HSH.com compared median home price data from the National Association of Realtors’ with their own data on 30-year fixed mortgage interest rates to determine exactly how much income you need to live in 27 key metropolitan areas in the U.S. The results are telling.

  • If you live in almost any part of the Midwest, earning enough to balance your income against your housing costs is fairly easy – St.Louis, Cincinnati, Cleveland and Pittsburgh are the four most affordable metros in the nation.
  • Chicago is a bit more expensive, but the minimum salary needed to afford a home is still below the average American household’s annual income of $66,877.
  • By contrast, if you live on the West Coast then chances are higher that low and middle income families are struggling to make ends meet. Four of the five key metropolitan areas in California rank as the least affordable in the country – Los Angeles, San Diego, San Jose and San Francisco all require salaries over $90,000 per year to afford a home.
  • Even Seattle requires an income above the national average and Portland comes in just shy of that average.
  • In the Northeast, both Boston and New York require incomes over the national average, but Philadelphia is the most affordable at less than $50,000
  • If you live in Texas, San Antonio is the most affordable, while Dallas and Houston both require income levels over $51,000 to afford a home.
  • South Florida is more expensive than Central Florida – Miami income requirements are just shy of the national average, while Tampa and Orlando require incomes of less than $50,000

Bad for residents and cities

The problem created by this gap between income and home affordability doesn’t just burden residents – it creates problems for cities and states with unfavorable affordability as well.

Low and middle income families may struggle to find affordable housing and are more likely to rely heavily on housing assistance programs. These programs are usually state-run, so even taxpayers who can afford their homes are essentially paying a price for living in a location with such high median home prices.  Families may also require additional federal and state assistance for other basic needs because their housing costs are using up so much income.

This is especially true in places like San Francisco, where even median rent prices are $3,600 per month.

“If homes are too expensive to buy and too expensive to rent, it leaves a large slice of the population in a serious financial bind that in the end, is bad for everyone,” says Maria Gaitan, Housing Director of Consolidated Credit. “The disparity forces low and middle income families to move farther and farther out from urban centers and increases the burden on state and municipal assistance programs.”

Walking a budgetary tight rope

If you’re not a high-income earner and you live in an area with significant housing cost challenges then you essentially have two choices – move to an area where it’s easier to afford housing or develop a financial strategy that allows you to devote more of your income to housing costs. This means keeping other debts like your credit cards minimized as much as possible.

The average family typically spends about 1/3 of their household income on housing costs, while about 10% goes to revolving debts like your credit cards. If your housing costs are taking up 40% or more of your income, then you really can’t afford to go into debt. As a result, credit card debt needs to be kept at a minimum to keep your debt-to-income ratio in balance. At the first sign that your balances are getting too high, you need to consult immediately with a credit counselor to find the right solution to eliminate that overhang quickly.

Additionally if you have other types of debt, those need to be eliminated as well if you really want to afford a home so you can get away from rising rent prices. Exploring options for federal student loan consolidation can help you eliminate your student loan debt so you have one less source of debt to worry about.

“If you have multiple sources of debt and you’re struggling to get ahead on a tight budget, reach out to talk to a HUD-certified housing counselor,” Gaitan advises. “They’re trained to help you assess your financial situation as a whole so you can identify the right path that will drive you toward homeownership. It may take several steps to get there, but it’s achievable even on a limited budget.”

Gaitan also advises that a HUD-certified housing counselor can help you identify those state and municipal housing assistance programs that are designed to help low and middle income families afford housing in those areas where it’s least affordable.

“A housing counselor can help buyers find first-time homebuyer courses that may help them qualify for programs like down payment and closing cost assistance,” Gaitan explains. “Programs vary by state and may even be specific to a metropolitan area, so a housing counselor is your best resource to find programs that would apply for you.”

For more information on housing counseling services, call Consolidated Credit today at 1-800-435-2261 to speak confidentially with a HUD-certified housing counselor at no charge.