You Need Nearly $110,000 to Afford the Typical Home, Report Says
If, like all of us, you’ve looked at home prices and wondered, "Who can afford this?" we finally have an answer.
Someone earning nearly $110,000 a year. A new Redfin analysis found that Americans need an annual income of $109,800 to afford the typical U.S. home.
That's a hefty paycheck, but there's a small bit of good news tucked into the numbers: home affordability is finally moving in the right direction.
Buying a Home Still Requires a Six-Figure Income
Redfin considers a home affordable when someone taking out a mortgage would spend no more than 30% of their income on the monthly housing payment. Using that measure, the income needed to buy a home is $109,796, just slightly below the record high of $110,382 one year ago.
Meanwhile, Redfin also reports that the typical household earns about $88,000. That leaves a gap of about $22,000 between what the average household makes and what they would need to comfortably afford the typical home.
But, the silver lining is that the gap was about $26,000 a year ago and $29,000 two years ago.
More Homes Are Becoming Affordable
There's another encouraging number hiding in Redfin's report. About 34% of homes currently listed for sale are considered affordable for someone earning the median household income.
That certainly doesn't mean buying a home has suddenly become easy. A typical household would still need to devote roughly 38% of their income to afford the median-priced home, considerably more than the 30% benchmark Redfin uses.
Still, the numbers suggest that some of the pressure that's defined the housing market in recent years may finally be easing.
Starter Homes Offer a Little More Hope
First-time buyers may have another reason to feel cautiously optimistic. Redfin's report also says the typical U.S. starter home costs about $262,000 and requires an annual household income of somewhere around $80,000.
They define starter homes as properties in the lower end of the local market, so that could mean a smaller single-family house, townhouse, or condo, depending on where you live.
Buyers also have something else they haven't enjoyed much of lately: negotiating power. Inventory is near its highest level since the pandemic, and sellers currently outnumber buyers nationwide, giving house hunters more room to negotiate than they've had in years.
Where You Live Makes a Big Difference
Of course, a national average only tells us so much. Redfin’s earlier research found that home affordability has been improving across much of the country, but some cities remain considerably easier on a buyer's budget than others.
Pittsburgh, St. Louis, and Indianapolis were among the metros where the typical household earned enough to afford a median-priced home.
As another silver lining, Zillow also expects the typical home to become affordable for a median-income household in 20 of the country's 50 largest metro areas by the end of 2026.
The Door to Homeownership Is Opening a Little Wider
No one is going to look at a required income of nearly $110,000 and think the housing crisis is over. Mortgage rates are still high, home prices are still high, and plenty of families are still priced out of the market.
Even Redfin's numbers show the typical American household doesn't earn enough to comfortably afford the typical home. But, after years of watching homeownership drift further and further out of reach, at least things are moving in the right direction.
For anyone hoping to pick up a set of keys someday, that's not exactly a welcome mat. But, if the housing market is going to become more affordable again, we have to start somewhere. Let’s consider this the first brick.
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