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DC Area’s Middle Class Can Afford Homes $441,000 and Under

by Lark Turner

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A new study from Trulia shows that about 62 percent of homes for sale in the DC area are in reach of the middle class.

The study, which uses data from the rather large DC metro area, puts the region’s median middle class income at $88,865 and from there calculates that an affordable home would be priced at $441,000. Of the homes on the market in the area, about 62 percent fall at or below that price point, Trulia reported in the study released Tuesday. If you look at just DC proper, that percentage falls to 44 percent; if you are looking in Prince George’s County, it jumps to 85 percent.

Trulia relied on an affordability calculation that puts the monthly cost of homeownership at 31 percent or less of a household’s monthly income. The total monthly payment for the report includes the mortgage payment assuming a 20 percent down payment. The percentage of available homes to the middle class would be lower if a down payment of lower than 20 percent was used in the calculation.

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Here are some other takeaways from the nationwide study, which calculated a different measure of “middle class” in each area:

  • The majority of homes for sale in most U.S markets are within reach of the middle class.
  • Over 80 percent of the homes for sale in Detroit and Cleveland are within reach of the middle class. In San Francisco, just 14 percent of homes for sale are considered affordable to the middle class.
  • Of the top 10 least affordable markets in the country, seven are in California.

See other articles related to: trulia, middle class, affordability

This article originally published at http://dc.urbanturf.com/articles/blog/trulia_dc_areas_middle_class_can_afford_homes_441k_and_under/8485

10 Comments

  1. PR said at 10:32 am on Wednesday May 14, 2014:

    Not sure how accurate this is, even outside the fact that the “DC metro area” is considered to be so large.  I couldn’t tell from the study if this also includes the countless total gut/rehab jobs listed throughout the city.  Sure, many people can afford them—but they probably can’t afford what it would cost to make them inhabitable.

  1. adriana said at 11:24 am on Wednesday May 14, 2014:

    Interesting. I make $125K, and I feel that I can barely afford my $380K mortgage.  I would imagine a person making $88K and having a $440K mortgage would need to have 0 debt, no car loan, and never go out.

  1. Vicente Fox said at 11:24 am on Wednesday May 14, 2014:

    But we have people on this site who say “People can find the money to buy pricey homes, and are finding it.”

    Real Estate only goes up!  Buy now before you are priced out forever!

  1. Navy Yard Res said at 2:54 pm on Wednesday May 14, 2014:

    I agree with Adriana. I don’t have a mortgage yet, but I definitely wouldn’t want a 440k mortgage on an $88k salary unless I put a ton of money down (which the average middle class person can’t afford to do). These “studies” rarely seem to be grounded in reality.

  1. Natasha Crowe said at 3:23 pm on Wednesday May 14, 2014:

    This study seems unrealistic and hard to believe, if you earn 88k and take out a mortgage for 440k - that’s borrowing x5 times your salary, how does the math work on only spending 31% on housing?

    Between myself and my boyfriend we earn over double the average and could just about afford our 500k house. Remember closing costs, down payments, furniture, loans, car - having to eat etc - it’s only just comfortable. There’s no way I could do it on half the salary. Strange and annoying article.

  1. saladman8283 said at 3:43 pm on Wednesday May 14, 2014:

    The study assumes 20% down, so the $441,000 house would mean a $353,000 mortgage.  If you have a 30 year mortgage, the payments in the first several years are going to be almost all interest, i.e., tax deductible, so you can increase the number of deductions and take home more pay.  At roughly $500 per $100,000 borrowed, it would be like the equivalent of paying around $1750/mo in rent, but with a tax benefit.  Then you have to calculate in property tax, insurance and maintenance.  But you can’t rent much here for $2200 or $2500 per month.  I agree, it is not easy for most people to come up with that down payment, however.

  1. Nick said at 4:08 pm on Wednesday May 14, 2014:

    The 20% down payment on a 440k home is not realistic for a person making 88k. 20% translates to about a 90k down payment.

    Even if a person comes up with 90k in cash for the down payment, with a 5% interest rate, the mortgage would still be about $2,350/mo.

    The rule of thumb is that your mortgage payment should never exceed 28% of your monthly gross income (which I think is still high considering we lose about 30% of our gross to 401k, Social Security, insurance and taxes). Nonetheless, $2,350 is about 32% of your monthly gross income… even if you forked over $90,000 for the down payment!

    Realistically, you’d have to find a home for $350,000 and have 15k-20k ready for the 3.5% FHA down payment and the closing cost. An FHA loan at 4.125% would translate to about $2,000 a month mortgage which is right at the 28% threshold for someone making 88k. 

    However, average purchase price for a home in DC is $467,000 according to Zillow, which makes a $350,000 home a bottom tier home.

  1. jan_djo said at 11:41 pm on Wednesday May 14, 2014:

    I agree with all of the above posters.  And you can’t have children added to that equation either.  That said, there is a scenario where having 20% down on 440K and making 88K is realistic - if you purchased a previous property and had been holding onto it for around 10 years and are getting ready to move up to a bigger property.  This is where it really makes sense to buy a starter property as SOON as possible out of college.  You could try to save that money, but that requires so much more self control than just making that mortgage payment.

  1. real estates said at 1:23 pm on Thursday May 15, 2014:

    I’d love you see something similar about new rental apartments. I know the new buildings just opening in Bethesda have 1 bedrooms starting from $2,500+. 1 bedrooms in the new Bainbridge Bethesda are in the $3,000s.

    I’m curious what percentage of middle or even upper class can afford that.

  1. james@att.net said at 6:13 am on Sunday May 18, 2014:

    It was I who wrote that people are finding the money to buy very pricey homes (because they are), but this was a dumb article in a number of particulars, most of which have been pointed out.

    On another subject, the best way to live comfortably in DC is start young and small. Buy something (but not just anything), even if you can’t “afford” it, and make those mortgage payments as if your life depends on it.

    Sell that property when you are sick of it or can afford better, timing is everything, and climb that property chain.

    I am a father and lifelong family breadwinner who makes just an average professional income, and this has worked for me.

    Caveats:  Your credit is your reputation, and buy “diamond” properties that are perfectly located. My first property was a well below-average condo in an amazing location, and it provided a return that began the climb. (We now live in a house and neighborhood of very wealthy people, though we are just “comfortable”.) Last, this will take decades. Don’t even try to rush it, or you will lose your ass.

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