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The Salary Needed to Buy a Home in 27 Different U.S. Cities

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Check out the latest 2023 update of the salary needed to buy a home in the U.S.

The Salary Needed to Buy a Home in 27 Different U.S. Cities

The Salary Needed to Buy a Home in 27 Different U.S. Cities

Check out the latest 2023 update of the salary needed to buy a home in the U.S.

The popping of the Greenspan-era housing bubble took about six years in total to fully “deflate”.

Most U.S. housing markets peaked sometime in 2006, and it wouldn’t be until just before the third-round of quantitative easing in 2012 that this fall would finally be cushioned. Since then, the combination of QE and record-low interest rates have helped re-inflate the housing market. For better or worse, real estate in many U.S. cities are now approaching or passing their 2006 housing highs, but with a growing disparity between individual metropolitan areas.

Today’s 3D map comes to us from HowMuch.net, and it shows the very different salaries needed to buy a median home in 27 different U.S. metropolitan areas. The salaries range between $31,134 to $147,996, which is a discrepancy of over $100,000.

At the low end of the spectrum, it takes a salary of between $30,000 to $40,000 to buy a home in most metropolitan areas in the Midwest. In St. Louis, for example, the salary needed to buy a home is $34,778. Pittsburgh was the least expensive city analyzed, where a salary of $31,135 could buy the median house in the city.

At the high end is any metropolitan area in California, for which closer to six figures is now needed. San Francisco has the most expensive housing in the country, where residents must make $147,996 a year to be an average homeowner. However, Southern California is not far behind the Bay Area, where salaries of $95,040 and $103,165 are required to buy in Los Angeles and San Diego respectively.

See the full data set, including mortgage rates, monthly payments, and median house prices here.

West Coast Envy

Which cities have rebounded the most since the popping of the housing bubble?

According to The Economist’s interactive chart on U.S. housing price indices, the average U.S. market recovery between 2006 peak and 2012 trough has been about 63.9%.

The Eastern half of the country has struggled to rebound to 2006 housing highs, with New York City, Baltimore, Philadelphia, Chicago, Tampa, Miami, and St. Louis all recovering below the above average mark.

In contrast, prices in the West are soaring: San Francisco, Houston, Dallas, Denver, and Portland have all met or exceeded their 2006 highs. Meanwhile, Los Angeles, Seattle, and San Diego have recovered better than average.

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Markets

Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Small- and mid-cap stocks have historically outperformed large caps. What are the opportunities and risks to consider?

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A line chart showing the historical return performance of small-, mid-, and large-cap stocks.

 

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The following content is sponsored by New York Life Investments
An infographic comparing low-, mid-, and large-cap stocks, including an area graph showing historical returns, a bubble chart showing how much $100 would be worth over 35 years, a horizontal bar graph showing annualized volatility, and a line graph showing relative forward price-to-earnings ratios, that together show that mid-cap stocks present a compelling investment opportunity.

Beyond Big Names: The Case for Small- and Mid-Cap Stocks

Over the last 35 years, small- and mid-cap stocks have outperformed large caps, making them an attractive choice for investors.

According to data from Yahoo Finance, from February 1989 to February 2024, large-cap stocks returned +1,664% versus +2,062% for small caps and +3,176% for mid caps.  

This graphic, sponsored by New York Life Investments, explores their return potential along with the risks to consider.

Higher Historical Returns

If you made a $100 investment in baskets of small-, mid-, and large-cap stocks in February 1989, what would each grouping be worth today?

Small CapsMid CapsLarge Caps
Starting value (February 1989)$100$100$100
Ending value (February 2024)$2,162$3,276$1,764

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Mid caps delivered the strongest performance since 1989, generating 86% more than large caps.

This superior historical track record is likely the result of the unique position mid-cap companies find themselves in. Mid-cap firms have generally successfully navigated early stage growth and are typically well-funded relative to small caps. And yet they are more dynamic and nimble than large-cap companies, allowing them to respond quicker to the market cycle.

Small caps also outperformed over this timeframe. They earned 23% more than large caps. 

Higher Volatility

However, higher historical returns of small- and mid-cap stocks came with increased risk. They both endured greater volatility than large caps. 

Small CapsMid CapsLarge Caps
Total Volatility18.9%17.4%14.8%

Source: Yahoo Finance (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Small-cap companies are typically earlier in their life cycle and tend to have thinner financial cushions to withstand periods of loss relative to large caps. As a result, they are usually the most volatile group followed by mid caps. Large-cap companies, as more mature and established players, exhibit the most stability in their stock prices.

Investing in small caps and mid caps requires a higher risk tolerance to withstand their price swings. For investors with longer time horizons who are capable of enduring higher risk, current market pricing strengthens the case for stocks of smaller companies.

Attractive Valuations

Large-cap stocks have historically high valuations, with their forward price-to-earnings ratio (P/E ratio) trading above their 10-year average, according to analysis conducted by FactSet.

Conversely, the forward P/E ratios of small- and mid-cap stocks seem to be presenting a compelling entry point. 

Small Caps/Large CapsMid Caps/Large Caps
Relative Forward P/E Ratios0.710.75
Discount29%25%

Source: Yardeni Research (2024). Small caps, mid caps, and large caps are represented by the S&P 600, S&P 400, and S&P 500 respectively.

Looking at both groups’ relative forward P/E ratios (small-cap P/E ratio divided by large-cap P/E ratio, and mid-cap P/E ratio divided by large-cap P/E ratio), small and mid caps are trading at their steepest discounts versus large caps since the early 2000s.

Discovering Small- and Mid-Cap Stocks

Growth-oriented investors looking to add equity exposure could consider incorporating small and mid caps into their portfolios.

With superior historical returns and relatively attractive valuations, small- and mid-cap stocks present a compelling opportunity for investors capable of tolerating greater volatility.

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