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A portion of the article: "According to the national real estate brokerage Redfin, it takes a minimum salary of $31,875, to purchase a median-priced home of $169,999 in Buffalo. Redfin said the monthly payment — including mortgage and taxes — would be $794.62. That placed Buffalo fifth out of 88 markets nationwide."
Great topic, thanks for posting. But I question some of those numbers...
I just pulled up a quick mortgage calculator on a popular real estate website, plugged in $169k home price for a 30-year mortgage with a 3.8% interest rate and 0% down...and the mortgage payment alone was $1,260/month. Including taxes and other fees, I’m guessing it would be north of $1,500 a month.
And that was with 0% down, which is the most that many low-income and moderate-income folks can afford to save. When I plugged in 10% down, the mortgage payment itself was $1,100/month. And for 20% down, it was still $1,000/month. And those are before taxes and other fees.
How much would 10% down be? That’s $17,000 that someone has to save. And 20% would be $34,000 - or more than a year’s salary, according to Redfin’s estimate.
According to one source, the average credit card debt in America is $15,000. That’s debt. And I’ve seen other sobering statistics where something like 50% of American have less than $500 in savings at any given time. So if we’re talking about a low-income or moderate-income person, I think it would be unlikely that they would have tens of thousands of dollars saved for a down payment on a home.
The other issue is the proportion of monthly income a person can reasonably afford. At Redfin’s $32k/year threshold, the person is only earning $2,600/month before taxes. After taxes, they’re making closer to $2,000/month. So Redfin’s $800/month mortgage payment is a whopping 40% of their income. That’s before utility bills - which will average hundreds of dollars a month more. And that’s before car ownership. (The total cost of car ownership for a typical American is estimated at over $1,000/month, including car loan payments, insurance, gasoline, repairs, etc.). We can already see that a person with $32k/year would be squeezed to pay $800/month, let alone the $1,200 to $1,500 a month that I think is more realistic.
Just to comfortably pay what I think is realistic for a $170k home, I think the income threshold should be double, or around $60k/year, at least in most cases.
That would be right at the median household income for the U.S. (Remember a household often has 2 wage earners.) And that seems more realistic. So get 2 people together earning $30k a year, and have them buy a house together, and they should be able to afford an average home in Buffalo. That meshes with reality.
And that’s still a good deal. That’s why Forbes recently ranked Buffalo as the #1 most affordable city in the country.
Great topic, thanks for posting. But I question some of those numbers...
I just pulled up a quick mortgage calculator on a popular real estate website, plugged in $169k home price for a 30-year mortgage with a 3.8% interest rate and 0% down...and the mortgage payment alone was $1,260/month. Including taxes and other fees, I’m guessing it would be north of $1,500 a month.
And that was with 0% down, which is the most that many low-income and moderate-income folks can afford to save. When I plugged in 10% down, the mortgage payment itself was $1,100/month. And for 20% down, it was still $1,000/month. And those are before taxes and other fees.
How much would 10% down be? That’s $17,000 that someone has to save. And 20% would be $34,000 - or more than a year’s salary, according to Redfin’s estimate.
According to one source, the average credit card debt in America is $15,000. That’s debt. And I’ve seen other sobering statistics where something like 50% of American have less than $500 in savings at any given time. So if we’re talking about a low-income or moderate-income person, I think it would be unlikely that they would have tens of thousands of dollars saved for a down payment on a home.
The other issue is the proportion of monthly income a person can reasonably afford. At Redfin’s $32k/year threshold, the person is only earning $2,600/month before taxes. After taxes, they’re making closer to $2,000/month. So Redfin’s $800/month mortgage payment is a whopping 40% of their income. That’s before utility bills - which will average hundreds of dollars a month more. And that’s before car ownership. (The total cost of car ownership for a typical American is estimated at over $1,000/month, including car loan payments, insurance, gasoline, repairs, etc.). We can already see that a person with $32k/year would be squeezed to pay $800/month, let alone the $1,200 to $1,500 a month that I think is more realistic.
Just to comfortably pay what I think is realistic for a $170k home, I think the income threshold should be double, or around $60k/year, at least in most cases.
That would be right at the median household income for the U.S. (Remember a household often has 2 wage earners.) And that seems more realistic. So get 2 people together earning $30k a year, and have them buy a house together, and they should be able to afford an average home in Buffalo. That meshes with reality.
And that’s still a good deal. That’s why Forbes recently ranked Buffalo as the #1 most affordable city in the country.
You would need PMI insurance with 0% or 10% down which would be around 75/month. Add in 3% property and school taxes of approx $5,100 or $425/month
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