Here’s where homebuyers are getting squeezed the most

FeaturedMoney

Written by:

You’ll often hear the common rule of thumb that the price of a home shouldn’t exceed three times your annual income. This can help homebuyers avoid becoming house rich and cash poor.

However, following this rule isn’t as easy as it seems. Despite the national recession sparked by the global COVID-19 pandemic, pent-up buyer demand and a lack of affordable homes throughout much of the country has pushed home prices higher in recent months.

Although record-low mortgage rates may offset some of the price increases, many buyers will likely need to take out larger home loans. As home prices continue to rise, buyers with stagnant incomes may need to stretch their budgets to afford a mortgage.

To see where borrowers are stretching their dollars the most to buy homes, LendingTree used information from the 2019 Home Mortgage Disclosure Act’s dataset to analyze how much leverage buyers have in the nation’s 50 largest metro areas. “Leverage” refers to the ratio of how much money is borrowed compared to a person’s income. In other words, LendingTree’s study ranks the places where people are taking out the largest home loans relative to their incomes.

______________________

SPONSORED: Find a Qualified Financial Advisor

1. Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.

2. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals get started now.

______________________

 

 

 

Image Credit: monkeybusinessimages / iStock.

Methodology

To determine the cities with the most leveraged homebuyer budgets, LendingTree looked at 2019 Home Mortgage Disclosure Act (HMDA) data for the nation’s 50 largest Core-Based Statistical Areas (CBSAs). HMDA is a federal law that requires most lenders to report their origination activity every year. From this HMDA data, which represents more than 5.3 million mortgage purchase loans, the median amount borrowed was divided by the median income for all purchases in the HMDA database for each city looked at in LendingTree’s study.

Here are the top 25 cities where homebuyers are being squeezed the most.

Image Credit: iStock/bernardbodo.

25. Tie: Tampa, Florida

Median income: $77,000

Median loan amount: $215,000

Leverage ratio: 2.792

Image Credit: Deposit Photos.

25. Tie: Jacksonville, Florida

Median income: $77,000

Median loan amount: $215,000

Leverage ratio: 2.792

Image Credit: Philip Rozenski / iStock.

24. Atlanta

Median income: $79,000

Median loan amount: $225,000

Leverage ratio: 2.848

Image Credit: DepositPhotos.com.

23. Minneapolis

Median income: $85,000

Median loan amount: $245,000

Leverage ratio: 2.882

Image Credit: Deposit Photos.

22. Richmond, Virginia

Median income: $80,000

Median loan amount: $235,000

Leverage ratio: 2.938

Image Credit: DepositPhotos.com.

21. Orlando, Florida

Median income: $79,000

Median loan amount: $235,000

Leverage ratio: 2.975

Image Credit: LUNAMARINA / iStock.

20. Baltimore

Median income: $92,000

Median loan amount: $275,000

Leverage ratio: 2.989

Image Credit: DepositPhotos.com.

19. Miami

Median income: $88,000

Median loan amount: $265,000

Leverage ratio: 3.011

Image Credit: Deposit Photos.

18. Nashville

Median income: $84,000

Median loan amount: $255,000

Leverage ratio: 3.036

Image Credit: iStock.

17. Phoenix

Median income: $80,000

Median loan amount: $245,000

Leverage ratio: 3.063

Image Credit: DepositPhotos.com.

16. Providence, Rhode Island

Median income: $83,000

Median loan amount: $255,000

Leverage ratio: 3.072

Image Credit: iStock.

15. Virginia Beach, Virginia

Median income: $76,000

Median loan amount: $235,000

Leverage ratio: 3.092

Image Credit: DenisTangneyJr.

14. Boston

Median income: $120,000

Median loan amount: $375,000

Leverage ratio: 3.125

Image Credit: DepositPhotos.com.

13. New York

Median income: $122,000

Median loan amount: $385,000

Leverage ratio: 3.156

Image Credit: Eloi_Omella.

12. Sacramento, California

Median income: $103,000

Median loan amount: $335,000

Leverage ratio: 3.252

Image Credit: DepositPhotos.com.

11. Washington, D.C.

Median income: $114,000

Median loan amount: $375,000

Leverage ratio: 3.289

Image Credit: iStock/rarrarorro.

10. Portland, Oregon

Median income: $100,000

Median loan amount: $335,000

Leverage ratio: 3.35

Image Credit: iStock/Sean Pavone.

9. Las Vegas

Median income: $79,000

Median loan amount: $265,000

Leverage ratio: 3.354

Image Credit: DepositPhotos.com.

8. Seattle

Median income: $119,000

Median loan amount: $405,000

Leverage ratio: 3.403

Image Credit: iStock/aiisha5.

7. San Francisco

Median income: $189,000

Median loan amount: $645,000

Leverage ratio: 3.413

Image Credit: DepositPhotos.com.

6. Riverside, California

Median income: $92,000

Median loan amount: $315,000

Leverage ratio: 3.424

Image Credit: DepositPhotos.com.

5. San Jose, California

Median income: $210,000

Median loan amount: $725,000

Leverage ratio: 3.452

Image Credit: iStock/GerardoBrucker.

4. Denver

Median income: $101,000

Median loan amount: $355,000

Leverage ratio: 3.515

Image Credit: iStock.

3. Salt Lake City

Median income: $79,000

Median loan amount: $285,000

Leverage ratio: 3.608

Image Credit: DepositPhotos.com.

2. Los Angeles

Median income: $138,000

Median loan amount: $505,000

Leverage ratio: 3.659

Image Credit: DepositPhotos.com.

1. San Diego, California

Median income: $128,000

Median loan amount: $485,000

Leverage ratio: 3.789

This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.

Image Credit: DepositPhotos.com.

AlertMe