Homeownership has long been the American Dream, but if you live in a major city, it may not be all that attainable. GOBankingRates recently did a study on home affordability and found that in several notable cities, homeownership is pretty much out of reach for more than 60% of households.

So what makes a home affordable? It's long been said that regardless of income level, your housing costs shouldn't exceed 30% of your net income (meaning, the amount you take home in your paychecks). However, there's some debate as to what that 30% figure should entail. Some financial experts will tell you that that 30% refers to a mortgage payment alone, while others will insist that it ought to cover annual property taxes and homeowners' insurance as well.

Spacious apartment interior.

Image source: Getty Images.

And then there are outliers, such as myself, who firmly believe that that 30% threshold should include a mortgage payment, property taxes, insurance, and predictable maintenance. What does predictable maintenance mean? In a nutshell, it's the stuff you know is coming when you buy a home -- things like gutter cleanings, heating system maintenance, and lawn care. It doesn't include things like your air conditioner completely malfunctioning or your water heater springing a major leak. Those are unfortunate possibilities, but they're certainly not run-of-the-mill.

Incorporating typical maintenance into that 30% calculation will give you more wiggle room in your budget for unknown expenses. If you're the type who likes to play it safe with your finances, then do yourself a favor and follow this more conservative guideline. Otherwise, at the very least, go with the middle ground -- that your personal 30% limit encompass not just your mortgage, but your property taxes and homeowners' insurance as well. Interestingly, GOBankingRates defines "affordable" as having a mortgage payment that doesn't exceed 30% of one's income, so if you're the risk-averse type, take the data you're about to see with a slightly larger grain of salt.

Where Americans can't afford to buy

Now that we've established what it means for a home to be considered affordable or not, let's see where you'll need to earn a small fortune to swing a mortgage payment. The following table represents the 10 least affordable cities from a buyer perspective:


Median Home Price

Percentage of Households That Can't Afford to Buy

San Francisco, CA



Boston, MA



Miami, FL



Long Beach, CA



Los Angeles, CA



New York, NY



San Jose, CA



San Diego, CA



Oakland, CA



New Orleans, LA



Data source: GOBankingRates.com

Of course, in many of the above cities, you'll find that the median income is considerably higher than the country's average. But that doesn't always translate into home affordability. San Francisco, for instance, has a median household income of $103,801, but to comfortably cover the mortgage associated with the median home listing, you'd need an income of $200,080.

Tax changes don't help things

While you do need a certain income to cover a hefty mortgage payment and its associated costs, there are a number of key tax breaks designed to make homeownership more affordable. Unfortunately, recent changes to the tax code have made those breaks less lucrative.

Let's start with the mortgage interest deduction, which can be particularly valuable in the early stages of a mortgage, when you're paying more in interest and less in principal. It used to be the case that you could write off the interest on mortgages worth up to $1 million, but under the new laws, that limit is capped at $750,000. This means that if you're looking for a home in San Francisco, New York, or San Jose, you may be out of luck, as the median prices in those areas exceed that $750,000 threshold.

Then there's the property tax deduction, which is part of the SALT, or state and local tax, deduction. This deduction was a boon to homeowners in expensive parts of the country because it was previously limitless. But under the new laws, the SALT deduction maxes out at $10,000, which means that depending on where you live, you may not manage to write off your property taxes in full. Incidentally, some of the above cities have relatively low tax rates, but as you can see, their home prices more than make up for it.

So where does this leave you? If you're looking to buy in one of these pricey cities, or a similarly expensive one, be honest with yourself about what you can comfortably afford. Otherwise, you risk compromising your financial security by getting in over your head. And frankly, that's not a risk worth taking.