A new Redfin report finds a household must earn nearly $110,000 a year to comfortably afford a typical home. That figure is down slightly from last year’s record high.
Rising household incomes and slower home-price growth helped narrow the gap.
Still, the average household earns about $22,000 less than what is needed to comfortably buy a median-priced home.
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Median household income rose 4% to $87,599, helping narrow the affordability gap. Still, the income needed to buy a home is about $22,000 higher than what a typical household earns.
Redfin defines “affordable” as spending no more than 30% of income on monthly housing costs, assuming a 15% down payment.
Starter homes are becoming somewhat more affordable, Redfin said. Buyers need an annual income of $70,693 to afford a typical entry-level home, down 1.5% from last year. Housing costs now consume 37.6% of a typical buyer’s income, down from 39.3% a year ago.
High mortgage rates are also keeping homeownership out of reach for many first-time buyers. The average rate reached 6.69% this week.
“The earnings needed to buy a house have stabilized after several years of deterioration, but that doesn’t mean homes are affordable to the average American,” Redfin senior economist Yingqi Xu said. “There’s still a double-digit gap between what the typical household earns and what they need to comfortably buy a home, leaving many prospective first-time buyers stalled on the sidelines.
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“But even if the market isn’t becoming much more affordable, it is becoming a bit more manageable for house hunters. It’s a buyer’s market in most of the country, especially places that were once pandemic homebuying hotspots like Nashville and Austin, giving buyers lots of options and strong negotiating power.”
