"Let me offer what I'll admit is an absurd example. Think of 30-year mortgages with no interest. Yes, 0%. My trusty spreadsheet found that under this homebuyer's ultimate dream scenario, the median wage requirement met rough qualification standards in just 12 states: West Virginia, Iowa, Ohio, Oklahoma, Michigan, Louisiana, Kansas, Kentucky, Illinois, Indiana, Mississippi and North Dakota. That's how crazy high home prices have become."
"California's $821,000 median-priced home gets a typical buyer a $2,919 monthly payment with a 0% mortgage. Don't forget the $164,000 down payment. Yes, payments are that high, even with a zero-percent loan! Remember, you still need to repay the loan's principal. California's payment is the second-highest among the states. Worse, 12 months of those payments equal 79% of the $44,600-a-year median wage - nowhere near the 30% threshold."
"Consider my house-financing assumptions for buyers: The median-priced home (using average values from Zillow and Redfin) and the median statewide income, according to federal pay data. Remember, the median is the midpoint of a data set where half is higher and half is lower. It's a statistical tool to measure what's typical. This hypothetical buyer is financing 80% of the purchase price."
Even with a hypothetical 0% 30-year mortgage, median-income households meet qualification standards in only 12 states when monthly housing costs (principal, property taxes, insurance) are limited to 30% of income. The calculation uses median home prices from Zillow and Redfin, median statewide wages from federal data, 80% financing, and annual taxes/insurance at 1.6% of home value. California's $821,000 median home yields $2,919 monthly payments and requires a $164,000 down payment, with payments equal to 79% of the median wage. Median wages in 37 states also fail the 30% threshold. Higher earners at the 75th percentile fare better.
Read at The Mercury News
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