Published March 13, 20193 min read
Housing is typically one of our biggest expenses, but it’s a good idea to not let it eat up too much of your income. The median housing cost per month in the U.S. is $1,036, which accounts for 22% of the average household income, according to the Census Bureau.
Median housing prices differ by state and city. We combed through Census data to find the hardest-to-afford housing areas in the country. (Here’s why big cities have such high prices).
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Housing affordability is relative. For example, San Francisco has some of the highest housing costs in the country, but many people make enough to bear those costs comfortably. Prices are more reasonable in Miami, but housing is harder to afford because pay is even lower. It’s important to take into account both your income and your location.
"I think a good rule of thumb is to try to budget 15% to 20% of your gross income for housing expenses," said Eric Roberge, certified financial planner and founder of Beyond Your Hammock.
He said while some experts may tell people they can allow as much as 30% of your income to housing, he recommends against it.
"The problem with that is that, while you might be able to technically afford it, it leaves very little wiggle room in your budget," he said. "Not only that, but the more you pay toward housing the less you have for other goals, from savings goals to goals that allow you to actually enjoy living your life."
Based on data from the Census American Housing Survey, here are the 10 most unaffordable metro areas to live in, ranked by total housing costs as percent of income.
Median housing costs: $1,111 Total housing costs as percent of income: 25%
Median housing cost: $1,122 Total housing costs as percent of income: 25%
Median housing cost: $1,667 Total housing costs as percent of income: 25%
Median housing cost: $2,292 Total housing costs as percent of income: 25%
Median housing costs: $927 Total housing costs as percent of income: 26%
Median housing cost: $2,095 Total housing costs as percent of income: 26%
Median housing cost: $1,381 Total housing costs as percent of income: 29%
Median housing costs: $1,529 Total housing costs as percent of income: 29%
Median housing cost: $1,549 Total housing costs as percent of income: 29%
Median housing cost: $1,275 Total housing costs as percent of income: 32%
Budgeting for housing depends on more than salary and location. Your other financial obligations also matter, like car payments or health insurance. A budget can help you calculate how much money you can spend on housing. This easy budgeting spreadsheet can help you get started.
There are a number of ways to keep your housing costs low. First, know your market. Identify the priciest neighborhoods and consider settling for one that’s more affordable. Next, make sure to make yourself an ideal buyer or renter. Bad credit can make it harder to rent an apartment or get approved for a mortgage. Focus on making improvements ahead of your search if you have bad credit. Lastly, don’t be afraid to negotiate. It doesn’t hurt to try for a lower price.
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