Affordability Gap Between Income Levels and Housing Prices
If housing is defined by HUD as affordable when no more than one third of a household’s income should be allocated towards housing, then this means that the maximum sale price a household can afford is about 3.794* times a household’s annual income. And the down payment required to purchase this home would be equal to 20% of this affordable price to secure a fixed 4.0% interest rate.
Based on these parameters and with 2022 regional median single-family home prices around $900K-$1MM, only households above Upper Middle income (earning greater than 195% of Nevada and Placer County’s area median income) would be able to afford a single-family home in the region without exceeding the 30% cost burden.
*Ownership Cost Assumptions Source: 2016 BAE Housing Needs Assessment
Buying Power for Home Purchase by Income Level for Nevada County
For Family of 4
Income Level – 245% AMI
- Annual Income – $241,080 100%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income) – $913,693 100%
- Tahoe Truckee Regional Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price – $36,307 0%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%
Income Level – 170% AMI
- Annual Income – $167,280 70%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income) – $633,991 70%
- Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price- $316,009 30%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%
Income Level – 120% AMI
- Annual Income – $118,100 49%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income) – $447,599 49%
- Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price- $502,401 50%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%
Income Level – 100% AMI
- Annual Income – $98,400 40%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income)- $372,936 40%
- Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price- $577,064 59%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%
Income Level – 80% AMI
- Annual Income – $78,700 33%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income)- $298,273 33%
- Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price- $651,727 67%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%
Buying Power for Home Purchase by Income Level for Placer County
For Family of 4
Income Level – 245% AMI
- Annual Income – $250,390 100%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income)- $948,978 100%
- Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price- $1,022 0%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%
Income Level – 170% AMI
- Annual Income – $173,740 70%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income)- $658,475 70%
- Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price- $291,525 27%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%
Income Level – 120% AMI
- Annual Income – $122,650 49%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income)- $464,844 49%
- Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price- $485,156 48%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%
Income Level – 100% AMI
- Annual Income – $102,200 41%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income)- $387,338 41%
- Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price- $562,662 57%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%
Income Level – 80% AMI
- Annual Income – $81,050 32%
- Affordable Home Purchase Price (Buying Power 3.79 Multiplied by Annual Income)- $307,180 32%
- Median Home Price – $950,000 100%
- Gap Between Regional Home Price and Affordable Home Purchase Price- $642,820 66%
- Minimum Down Payment Required For $900K Regional Median Home Price- $190,000 20%