It happens every month: Millions of American pony up for the gas bill, mortgage or rent payment and real estate taxes--and subsequently watch their bank balances dwindle. That's because housing expenses are the biggest monthly expense most families face.
But there's a big difference between the size of your payments if you live in Seattle, Wash., than if you have put down roots in New York, N.Y. And if you live in California, you're likely to be writing bigger checks than anywhere else in the country: More than half of the 20 most expensive cities for housing are in the Golden State, according to a report released last week by the U.S. Census Bureau.
San Jose commands the largest amount in housing costs of all metro areas we surveyed for this story. After you've shelled out for your monthly mortgage payments (or gross rent, if you're a renter), not to mention utilities, taxes and insurance, you'll be $1,828 poorer in this Silicon Valley hub.
Behind The Numbers
The Census Bureau collects information about housing costs in its American Community Survey, an annual update to the more comprehensive decennial census. The 2008 survey, released last month, asked renters and homeowners in select Metropolitan and Micropolitan Statistical Areas--geographic entities that the U.S. Office of Management and Budget defines and uses in collecting statistics--about their monthly expenses. Median monthly housing costs include rent or mortgage payments, in addition to other property debts, real estate taxes, various types of home insurance, fuel for heating, utilities and maintenance.
High monthly costs in places like San Francisco ($1,660) and Washington, D.C., ($1,706) don't necessarily make owning and renting terribly expensive for area residents--median household incomes in many of these places are similarly high, $76,848 in San Francisco, for example. But to a person from Augusta, Ga., where most people pay somewhere around $751 per month, housing costs upward of $1,300 seem prohibitive.
Demand drives up price in the areas with the most amenities and cultural cache. When the housing supply is also restricted, home-dwellers pay even more. That's the case in coastal cities, like Seattle and San Francisco, where jobs and access to entertainment attract families, but the waters that bookend them put a firm limit on urban sprawl.
"There's only so much land in Manhattan," says Dean Baker, co-director at the Washington-based Center for Economic and Policy Research. "You'll pay a premium to live on the coast."
But not all cities with national recognition and abundant amenities have astronomical costs. Housing costs in Chicago are $1,254. That's 30% less than what they are in San Jose, Calif.-one of the top three cities for housing costs, along with Bridgeport, Conn., (and the surrounding metro, which includes wealthy enclaves like Stamford and Norwalk) and Oxnard, Calif., (which includes Ventura and Thousand Oaks). Baker says Chicago's relatively low costs result in part from loose building regulations and an abundance of land. This means developers can quickly meet demand with new housing, keeping costs relatively low. "At least on three sides, you can just keep building out," Baker says.
Real estate markets in numerous Texas metros follow a similar pattern: loose zoning and lots of space to build, keeping costs low relative to other big cities. In Houston, residents spend $1,004 per month on housing, and in Dallas, $1,055.
It's not all home prices and desirability, though. Cities that are largely populated by renters are likely to have a cheaper median housing cost, since rents don't rise as quickly as home prices.
Read on for more real estate, including which U.S. areas have the highest median income, and an interactive look at the country's most expensive zip codes.
"Renting is typically less expensive," says Keith Wardrip, senior research associate at the Center for Housing Policy, a non-partisan research organization based in Washington, D.C. "Any areas with a high percentage of renters will have lower costs."
The Tax Question
Residents of New Jersey are forever complaining about their burdensome real estate taxes. Indeed, overall housing costs in the Trenton, N.J., metro are pushed higher by the $6,263 median annual property tax. That's $2,938 more than what homeowners pay in neighboring Allentown, Pa., and $4,336 more than the national average. But owners there may be compensating for areas where other taxes are low. Because of New Jersey's tax structure, local municipalities have limited control over what taxes they can impose, thus they reap most of their revenue from property tax.
Some metro areas with working-class cities have their median housing costs pulled upward by neighboring areas that are far more posh. The metro areas that have Bridgeport, Conn., and Trenton, N.J., as their principal cities command high housing costs in spite of Bridgeport and Trenton not being known as culture or employment meccas. But consider that the tony suburbs of Stamford and Princeton respectively are squeezed into these metros and you get a better idea of why you're likely to spend around $1,793 and $1,401 if you live in those areas.
Spots that are notorious for their high cost of living, like New York City, San Francisco and Seattle also make the list. You'll pay $1,363 to lodge in the Big Apple, $1,660 to bed down by the Golden Gate,and $1,368 to make the grunge capital your home.
To live in idyllic Honolulu, whose small size keeps a lid on overbuilding will cost you $1,532 per month in housing. In this metro, it's easy to see why demand drives up costs.
"Who wouldn't want to live there?" says Wardrip.
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