Buying a Home? You May Need a $100,000 Salary.

Today, I’m picking some low-lying fruit of the “newsy” variety. It comes straight from the top of my email inbox courtesy of Zillow’s Media Room.

I know the title gave it away. (I’m terrible with clickbait.) Zillow’s research found More Than a Third of Home Buyers Now Make More Than $100,000.

Before we break apart that title, let’s do a little commonsense math check. That means that nearly two thirds of home buyers make less than $100,000. You still have a better than average chance of buying a home if you make less than $100,000.

When I first read the article, I was thinking that it was a comparison of haves (home owners) and have-nots (renters). However, it’s really three groups: The getting (home buyers), the haves (already home owners, and the have-nots (renters). Usually the home buyers and home owners make similar household incomes, but lately it’s changed so that home buyers actually make a little more… an average of ~$80,000 vs. an average of $75,000.

The press release does a little analysis, but it’s a little confusing. It seems that maybe first time home buyers need to make a little more a year so that they can save a little more for a down payment. In other words, there’s nothing too surprising.

The renter income numbers were a little more interesting to look at. The average household income there was $38,300 or about half of the home buyers/home owners. Zillow points out that young and single people are more likely to rent (makes complete sense). Who would have guessed that a single person with one income might choose to rent, but change his/her mind if they pair up with a partner creating a second income? (That’s sarcasm.)

I think I takeaway two things from the article:

1. A rule of thumb to buying a home might be to have a household income of around $75K-80K.
2. As with all rules of thumb, the individual situation matters greatly. In this case, Zillow breaks down the numbers for some of the largest metros.

That second point is most likely the most useful information in this report. In Pittsburgh and Tampa, buyers are getting in ~$65,000. In New York or Boston, buyers are getting in at ~$120K. You can use the chart to see what your area average is. Of course few people buy an exactly average home, but at least it’s at least a number you use.

If you are an investor, you can even crunch the numbers a different way. It didn’t take me long to notice that Tampa’s earners are one of the lowest, but it’s renter earns nearly the national average. The renter makes 57% as much of the buyer. Maybe it makes to buy a property in Tampa and rent it out? They’ll likely be able to pay their bills since it supports a higher rent.

On the other end of the spectrum, Philadelphia’s first time buyers earn $98,000 (well above average) and the renters earn a below average $35,300. Their renters are making as much money as even Tampa and it looks like a tougher market to buy into in the first place. Spending more on an investment property if renters aren’t likely to pay as much doesn’t seem like a smart plan.

Zillow’s chart made it extremely to put in a spreadsheet and pull out these numbers. It was literally almost a full 60 seconds. Since it was so easy, I’ll leave it as an exercise for the reader (it’ll take me longer to upload it).

So what do you think? Did you find anything useful or interesting in this data? Let me know in the comments.