Buying a home? Here’s how many hours you need to work

Since the turn of the century, home prices in the U.S. have almost doubled, while median household income has barely budged. This, combined with a limited supply of entry-level homes, contributed to declining homeownership rates over the past 10 years. However, data from the latest U.S. Census Current Population Survey suggest that trend could be turning around.


With homeownership rates ticking upward, researchers at Branch Publishing wanted to see how many hours the typical person would need to work to afford a home in various cities across the country.

According to Zillow, the median home listing price in the U.S. for December 2017 was $256,000, but there’s a huge amount of geographic variability. In San Francisco, for example, the median listing price exceeded $1,100,000 for 2017; whereas, in Philadelphia the figure hovered around $180,000. Likewise, median household income varies by location, but doesn’t always correlate well with home prices. This results in big differences in affordability across major metros.

How the calculation works

To calculate how many hours someone would need to work to afford a home in each city, the Branch Publishing research team combined median household incomes from the U.S. Census, median home listing prices from Zillow, and state-specific mortgage rates from Zillow. Using this data, Branch Publishing approximated the typical monthly mortgage payment (assuming a 30-year fixed term loan with a 20% downpayment), hourly wage (assuming a standard 40-hour work week), and number of work hours needed to make the loan payment (assuming the 28% rule) for each city. The 28% rule, which states that a household should spend a maximum of 28% of its gross monthly income on housing expenses, is a general guideline used by mortgage lenders to assess an individual’s borrowing capacity. The number of hours reported is the minimum needed to ensure that the monthly mortgage payment doesn’t exceed 28% of gross monthly income.

Looking at the results, it’s not surprising that the least affordable cities are predominantly concentrated on the coasts, with 12 of the 15 most expensive places to live located in California. A typical earner purchasing a typical home in any one of these areas would need to work over 2-3X the standard 40-hour work week to get approved for a mortgage.


On the flipside, the most affordable cities are concentrated in the Midwest, a third of which can be found in Ohio.


Looking at the most populous cities, the results vary widely—ranging from 104 hours of work needed per week in New York, NY to just 16 hours per week needed in Memphis, TN. Here’s how much you’d need to work to buy a home in the 25 largest U.S. cities:

Image result for new york cityPhoto Credit: Wikimedia

New York, NY

  • Median home list price: $820,674
  • Median annual income: $55,191
  • Monthly mortgage payment: $3,218
  • Work hours per week: 104

Image result for los angeles city Photo Credit: Wikimedia

Los Angeles, CA

  • Median home list price: $735,387
  • Median annual income: $51,538
  • Monthly mortgage payment: $2,863
  • Work hours per week: 99

Photo Credit: Wikimedia

Chicago, IL

  • Median home list price: $287,508
  • Median annual income: $50,434
  • Monthly mortgage payment: $1,123
  • Work hours per week: 40

Photo Credit: Wikimedia

Houston, TX

  • Median home list price: $315,875
  • Median annual income: $47,010
  • Monthly mortgage payment: $1,230
  • Work hours per week: 47

Photo Credit: Wikimedia

Phoenix, AZ

  • Median home list price: $263,758
  • Median annual income: $49,328
  • Monthly mortgage payment: $1,033
  • Work hours per week: 37

Photo Credit: Wikimedia

Philadelphia, PA

  • Median home list price: $179,750
  • Median annual income: $39,770
  • Monthly mortgage payment: $702
  • Work hours per week: 32

Photo Credit: Wikimedia

San Antonio, TX

  • Median home list price: $236,610
  • Median annual income: $48,183
  • Monthly mortgage payment: $921
  • Work hours per week: 34

Photo Credit: Wikimedia

San Diego, CA

  • Median home list price: $652,540
  • Median annual income: $68,117
  • Monthly mortgage payment: $2,541
  • Work hours per week: 67

Photo Credit: Wikimedia

Dallas, TX

  • Median home list price: $380,541
  • Median annual income: $45,215
  • Monthly mortgage payment: $1,482
  • Work hours per week: 59

Photo Credit: Wikimedia

San Jose, CA

  • Median home list price: $827,945
  • Median annual income: $90,303
  • Monthly mortgage payment: $3,224
  • Work hours per week: 64

Photo Credit: Wikimedia

Austin, TX

  • Median home list price: $387,654
  • Median annual income: $60,939
  • Monthly mortgage payment: $1,509
  • Work hours per week: 44

Photo Credit: Wikimedia

Jacksonville, FL

  • Median home list price: $189,244
  • Median annual income: $48,256
  • Monthly mortgage payment: $737
  • Work hours per week: 27

Photo Credit: Wikimedia

San Francisco, CA

  • Median home list price: $1,177,733
  • Median annual income: $87,701
  • Monthly mortgage payment: $4,586
  • Work hours per week: 93

Photo Credit: Wikimedia

Columbus, OH

  • Median home list price: $154,414
  • Median annual income: $47,156
  • Monthly mortgage payment: $604
  • Work hours per week: 23

Photo Credit: Wikimedia

Indianapolis, IN

  • Median home list price: $137,328
  • Median annual income: $43,101
  • Monthly mortgage payment: $537
  • Work hours per week: 22

Photo Credit: Wikimedia

Fort Worth, TX

  • Median home list price: $234,670
  • Median annual income: $54,876
  • Monthly mortgage payment: $914
  • Work hours per week: 30

Photo Credit: Wikimedia

Charlotte, NC

  • Median home list price: $275,774
  • Median annual income: $55,599
  • Monthly mortgage payment: $1,076
  • Work hours per week: 35

Photo Credit: Wikimedia

Seattle, WA

  • Median home list price: $646,225
  • Median annual income: $74,458
  • Monthly mortgage payment: $2,522
  • Work hours per week: 61

Photo Credit: Wikimedia

Denver, CO

  • Median home list price: $471,288
  • Median annual income: $56,258
  • Monthly mortgage payment: $1,839
  • Work hours per week: 58

Photo Credit: Wikimedia

El Paso, TX

  • Median home list price: $169,274
  • Median annual income: $43,322
  • Monthly mortgage payment: $659
  • Work hours per week: 27

Photo Credit: Wikimedia

Washington, DC

  • Median home list price: $544,116
  • Median annual income: $72,935
  • Monthly mortgage payment: $2,131
  • Work hours per week: 52.2

Photo Credit: Wikimedia

Boston, MA

  • Median home list price: $694,283
  • Median annual income: $58,516
  • Monthly mortgage payment: $2,706
  • Work hours per week: 83

Photo Credit: Wikimedia

Nashville, TN

  • Median home list price: $318,541
  • Median annual income: $49,891
  • Monthly mortgage payment: $1,245
  • Work hours per week: 45

Photo Credit: Wikimedia

Memphis, TN

  • Median home list price: $86,555
  • Median annual income: $36,975
  • Monthly mortgage payment: $338
  • Work hours per week: 16

Photo Credit: Wikimedia

Portland, OR

  • Median home list price: $425,268
  • Median annual income: $58,423
  • Monthly mortgage payment: $1,660
  • Work hours per week: 51

 

Methodology

Median household income for each city was sourced from the latest U.S. Census Bureau’s American Community Survey 5-year estimates. 2017 median home listing prices were sourced from Zillow. State-specific mortgage rates were also sourced from Zillow on 2/13/18. Assuming a 40-hour work week and 50 weeks worked per year, an approximation for effective hourly wage was determined using median household income. Approximate monthly mortgage payments were calculated using the median listing prices and state-specific mortgage rates according to the following formula: [R/(((1 + R)^M) – 1)] x [(1 + R)^M] x L, where R is the monthly interest rate, M is the number of monthly payments, and L is the loan amount. For this calculation, we assumed a 30-year fixed mortgage with a 20% down payment. Assuming the 28% rule, the resulting monthly mortgage payment for each city was combined with its effective hourly wage to determine the number of work hours needed per week to make the monthly loan payment. Only cities with available price data from Zillow were included. Cities with under 50,000 adults were excluded from the analysis.