In Lincoln from 7/6/2021-7/6/2022 the average home (condo and single family) sold for $1,423,684. **The period of the highest prices ever in Lincoln** To purchase a home most people get a mortgage from a bank, most often for 80% of the cost of the purchase. Apply that to this “average home price” and in this example the buyer has about $284,600 to put down and borrows about $1,138,400. If that mortgage is a standard, 30 year, fixed rate mortgage at, say, 5%, the monthly payment for the mortgage alone is $6,111 per month. The taxes on that home are a little “squishier” because houses are not automatically reassessed after people buy them, and the assessments rarely line up with purchase prices. Most likely, because house prices have risen a lot in 2020 and 2021, this “average” home was probably assessed around $1.1M, which, with a tax rate of $14.93 per thousand means a yearly tax bill of $16,423, which adds $1,369 to the monthly bill. Homeowners insurance is also a required monthly expense for calculating affordability, we can assume this family has a $4,000/year homeowners insurance bill, or $333 per month. 

→ Mortgage {$6111}+ Taxes {$1369}+ HOI ($333) = Total $7,813 per month 

If that housing cost is “affordable” (30% of their household income) they have to have a monthly income of $26,043, or an annual household income of at least $312,520.

Variations: 

  1. If this household had a much smaller income, but had a high wealth (only needed a $200,000 mortgage because they sold property worth $1.223M that they owned outright, or they inherited the home rather than having to buy it) it could still be affordable to them since the monthly costs would be significantly lower.
  2. There are a lot more households with incomes over $300,000 in Eastern Massachusetts than one might anticipate. 
    1. The Median household income in Middlesex county in 2020 according to the Fed is $111,158. 
    2. Income inequality has really driven increased incomes at the top of the income spectrum, especially as you compare the most recent data to older data. 
    3. Income inequality can be assessed by an index. This index is called the Gini coefficient, and it describes the inequality in a data set, were, for example 0 would be an equal distribution of – in this case – income, and 1 would be totally unequal, or all income going to one person. In the past 30 years, the Gini coefficient of the US has risen from .43 to .49.  Lincoln has a high Gini coefficient (index of inequality of .52.)

Owning

Purchasing a home is one point in time when we can understand affordability, but owning a home – or ongoing ownership – can be another way to think about  affordability. 

Unexpected financial hardship or increased costs impact Lincoln when:

  •  Residents have fixed or limited incomes are faced with increased costs, such as taxes.
  • Any homeowners who have suddenly decreased income.

In these situations, homeownership can become unaffordable. Ultimately, homeowners can be forced to sell their homes