U.S. Home Prices Unaffordable for Many Workers: Study

CHICAGO (Reuters) - U.S. home prices may have dipped over the past year, but many American workers would still struggle to afford a median-priced home in major cities, a new study said on Wednesday.

``American workers are really not gaining ground and they're so far behind in the first place,'' said Barbara Lipman, research director for the nonprofit Center for Housing Policy, which conducted the study.

While the median home price in the 202 largest metropolitan areas declined 2 percent from a year ago to $248,000 in the third quarter of 2006, mortgage rates rose enough over the year that homes actually became less affordable as pay did not keep pace.

``The real story is what happened to salaries,'' Lipman said. ''Lower-paid occupations -- such as in retail, or home health workers -- their salaries went up only about 3 percent.''

The study found an annual income of nearly $85,000 was needed to afford the median-priced U.S. home.

In the New York metropolitan area, a $500,000 median-priced home required a $171,000 annual salary. The median-priced home in San Francisco, the most expensive U.S. market, was $759,000, requiring income of $260,000. In less-expensive Chicago, the median-priced home cost $254,000, requiring an $87,000 salary.

On the opposite end of the spectrum, Mansfield, Ohio, homes cost a median $85,000, requiring $29,118 in income.

The study assumed home buyers needed a 10 percent down payment and could afford to pay 28 percent of their income on mortgage payments, property taxes and home insurance.

In reality, many households expend a much higher percentage of their incomes on mortgage payments, Lipman said. To afford that, consumers cut other expenses such as for health care and transportation, she said, citing research showing unaffordable housing is the major reason families lack health insurance.

Other ways families cope with high housing expenses is to work longer hours or extra jobs, or by crowding in more income producers, she said. An October 2006 survey by the group found families who seek to buy less-expensive homes in further-out suburbs -- adding to urban sprawl -- pay so much more for transit that it eliminates the savings.

While home prices range widely across the country, wages for low-wage jobs -- from teachers to janitors -- are about the same no matter where they are located, Lipman said.

The report cited housing aid programs offered by some big-city hospitals that have plenty of modestly-paid workers.

``For the low- to moderate-income individuals that we're talking about, they're not going to be helped by marginal declines in home prices,'' Lipman said. ``The only way to address the problem is to create more affordable units (homes) -- which may mean higher density units, townhouses and condos.''