How Many Years Do You Need To Buy A Home In The U.S.?

Did you know that almost half of Americans live in the top-20 metro areas? And it takes 10-12 years for a person with a median income to buy a median home for the family.

Let's get on the same page with the basic terms:
- Median income: half of the people in the area earn more, half - less.
- Median price: half of the homes are more expensive than this price, half are cheaper.
- Median house for a family: a 1,500sf house with a median price in the metro area.
- To buy a house: put a 15% down payment for a mortgage.
- How do we calculate the savings: we take a very optimistic 10% savings rate (the national average is 4-5% [bea.gov]). And we use the pre-tax income because of the complexity of tax calculations. So, we think we actually consider both working adults in a couple.
- Why family? We will dive deeper on that in a dedicated column about Prosperity Index and what's luxury living. Long story short: statistically and scientifically, having a family for a long time is the top-1 item for a long happy life.

As you can see, it takes 10-12 years for a median-income person with a very optimistic savings rate to afford a low-end down for a median home in their area. Well-versed readers might say "hey, there are no-down or 3% down programs." But, in most cases they cover rural areas, or low-income people, or may be used only for very cheap homes.

If you're aware of a financing product with a less than 10-15% down for $700k+ homes closely to popular metros - please text us at prosperitywayfoundation@gmail.com

No surprise, San Francisco Bay Area turned out to be the most unaffordable metro in America. A median person will spend mind-blowing 20 years to put a down payment for a median home. By the way, here's the HOME:

This $1,195,000 1,300sf beauty looks quite tired, will require investments in renovation, and is about half-hour ride from major office areas.

Los Angeles is one of the most expensive housing markets in the U.S. A median-income person would need 20 years to save a down payment.

Consider the house in Van Nuys, listed for $1.099 million. This is a typical example of what buyers face: for over a million dollars, you get a modest single-story home, built in the 1684sf, that requires significant renovation. While it offers four bedrooms and two bathrooms, its condition and dated design show that the high price doesn't guarantee a modern or new home, but rather reflects the overall scarcity of affordable housing in the region.

A median-income person in NY would need 18 years to save a down payment.

Source: zillow.com

Here is what the housing market looks like in Queens Village, New York. A modest, 1,120 sf detached house with a driveway is currently listed for $799,000. While this is significantly less than the multi-million dollar homes in Manhattan, it represents a substantial investment for a modest home in an outer borough that often requires further renovation to become a comfortable family residence.

Detroit is the most affordable major city in our analysis, with a median home price around $99,000. It would take a median earner just 3 years to save for a down payment

A home on Somerset Ave, for example, can be found for as little as $89,900. However, it’s a small 1,160 sf house that may be in a less desirable area and likely requires significant renovations.

St. Louis is another highly affordable city, where it takes about 6 years to save for a down payment. The median home price here is $220,000.

For $225,000, you can find a home on Circleview Dr with 4 bedrooms, 2 bathrooms, and a total area of 1,772 sf. While a great size for the price, the home is likely located in a less sought-after neighborhood and may need some updates.

In Philadelphia, a median resident would need about 7 years to save a down payment. The average home price here is $269,000.

For $275,000, you can acquire a house on Summit Ave with 3 bedrooms, 1 bathroom, and 1,280 sf. Similar to other affordable metros, this home might be in a less-developed area and have its own set of drawbacks.

There's a popular lifestyle pattern: move to the most hyped city to make more money and become rich faster. As you see, it doesn't work well for large American metro areas. The largest and most popular towns will suck you dry with a 50%+ probability. Plus, most homes there are pretty low-quality.

Two of our team members personally lived in SF and Manhattan and toured a few dozens of properties, all the way up to $18m. And it's always a compromise: noisy street, wall-to-wall views, a homeless spot around the corner, etc. While smaller towns often provide way more bang for your buck. Plus, if you can work remotely, or you're a business owner - smaller cities will give you a lavish lifestyle for a fraction of the cost compared to NY/SF/LA.

Some might notice that the median income is too low, because the income distribution is very inequal. Yes, it's true! Here's how people can interpret the "median income" term:

But the actual income distribution looks way different:

This inequality explains why the most areas of the most cities look, let's say, not so inspiring. Because half of the people earns less than 10% of the money. So, the housing market is also adopted to this distribution curve. Just look at the median homes in SF and cry :)

Our Foundation is developing two directions:

1/ Drive home prices down by automation of factories and developing areas with cheaper land into vibrant communities.

2/ Drive median incomes up by engaging people to learn demanded professions or start businesses.

Feel free to join our Telegram communnity.

Thanks!