Income by Percentile in Massachusetts

by Michelle J. Lane, Realtor

For those of you who received my recent newsletter you know that the real estate market in showing signs of slowing growth.  There are serveral reasons for this.  I mentioned that a major reason is simply that buyers have hit the wall on how much house they can afford.   This post provides some background on what that means.   

Looking at the country as a whole, the income required to be a top earner is as follows.  

  • $480,930 – to be considered in the top 1% 
  • $214,462 – to be considered in the top 5%
  • $138,031 – to be considered in the top 10% 
  • $122,744 – to be considered upper class (earning twice the median of $61,372)

Contrast that with what it takes to be in those same percentiles in Massachusetts:

  • $582,774 – to be considered in the top 1% 
  • $260,286 – to be considered in the top 5%
  • $192,612 – to be considered in the top 10% 
  • $164,760 – to be considered upper class (earning twice the median)

The good news is that more people in the Boston metro area earn an income in the Upper Class bracket than in the rest of the country.

The bad news is that the median price of a single-family house in the Boston area is $615,000 vs $200,000 in the US as a whole.   Other surrounds towns median prices are as follows:

  • Brookline – $1,760,000
  • Newton – $1,202,500
  • Wellesley – $1,433,250
  • Milton – $688,000
  • Cambridge – $1,442,500
  • Somerville – $752,500
  • Medford – $611,000

If you want the numbers for your town, just ask and I will look that up for you.

SO, the median home price in the US is 3.26 times the median income of $61,372. The median home price in Massachusetts is 7.45 times the median salary of $82,380.  

In Newton, where I live, the median income is $147,854. The median home price is $1,202,500.  That is a ratio of home prices that are 8.13 times the median income. This is untenable. Granted, the Boston area has more high income earners than other parts of the state and certainly, other parts of the country.  See the chart below.  But there are only so many high earners to buy in the area and those earners want the best houses – those that are new or in like-new condition and in desirable locations.  That leaves sellers who do not have new or near-perfect homes with a smaller pool of buyers which is why we are seeing a softening of the market on the lower end.  Higher interest rates are bound to compound the problem.

The good news is two-fold 

  1. every house can sell.  It just has to be priced right for the amount of money and effort you are willing to invest to prepare it for the market.
  2. because of low inventory, the market is not going to slump. It appears, for now, simply that price growth is slowing.

 

Michelle J. Lane
MICHELLE J. LANE, Realtor
Century 21 Commonwealth
CELL: 617 584-3904