The Blubber

Recent research from GOBankingRates reveals that in several major U.S. cities, an annual income of $150,000 may only qualify you as “lower middle class.” This is particularly true in two Northern California cities and Arlington, Virginia.

In these high-cost areas, the steep prices for essentials such as housing, childcare, and transportation mean that even relatively high household incomes can stretch middle-class families financially. This situation prompts a reevaluation of what it means to be “rich” versus “middle class” in various regions.

“In San Francisco, the median home price reached $1.2 million in December 2023. If you're earning $150K a year before taxes, buying a home becomes a significant challenge,” noted Jeff Rose, founder of Alliance Wealth Management.

The mortgage calculations for the typical middle-class family in San Francisco don’t add up. “Monthly payments on a $1.2 million home, even with a large down payment, could easily exceed $5,000, depending on mortgage terms and interest rates,” Rose explained. “This could consume more than 40% of your gross monthly income if you make $150K, well above the recommended 30% or less.”

Given the unrealistic home prices, renting often becomes the more feasible option for middle-class families.

“Unfortunately, renting isn’t much better!” Rose added. “With the average rent for an apartment in San Francisco at $3,267, that amounts to about 26% of your gross monthly income if you’re making $150K a year. This percentage might seem manageable initially, but once you account for taxes, healthcare, transportation, and other living expenses, the remainder of your salary can quickly be depleted.”

In Arlington, the cost of living is 41% higher than the U.S. national average, and housing costs are 121% above the national average.

Rodney Griffin, a financial advisor with Northwestern Mutual’s Washington, D.C. office, notes that Arlington’s economic and population growth has created attractive job opportunities near the nation’s capital. However, this growth has significantly increased the cost of living.

“Clients in Arlington are feeling the impact through higher costs for housing, transportation, healthcare, education, and general lifestyle,” Griffin said. “While $150,000 may be a comfortable salary in some areas, the high demand and competition can drive up the cost of living.”