{"id":76927,"date":"2023-10-17T05:00:10","date_gmt":"2023-10-17T12:00:10","guid":{"rendered":"https:\/\/www.redfin.com\/news\/?p=76927"},"modified":"2023-10-18T15:56:55","modified_gmt":"2023-10-18T22:56:55","slug":"homebuyer-income-afford-home-record-high","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/news\/homebuyer-income-afford-home-record-high\/","title":{"rendered":"Homebuyers Must Earn $115,000 to Afford the Typical U.S. Home. That\u2019s About $40,000 More Than the Typical American Household Earns."},"content":{"rendered":"

Sky-high mortgage rates and still-rising home prices have made it harder than ever to afford a home, especially for first-time buyers. The typical buyer needs to earn 15% more than they did a year ago\u2013and wages are only up 5%.<\/span><\/i><\/p>\n

It\u2019s harder than ever for Americans to afford a home.\u00a0<\/span><\/p>\n

A homebuyer must earn $114,627 to afford the median-priced U.S. home, up 15% ($15,285) from a year ago and up more than 50% since the start of the pandemic. That\u2019s the highest annual income necessary to afford a home on record.\u00a0<\/span><\/p>\n

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This is based on a Redfin analysis that compares median monthly mortgage payments for homebuyers in August 2023 and August 2022. The national income data in this analysis is adjusted for inflation. See the bottom of this report for more on methodology.\u00a0<\/span><\/p>\n

Housing costs are higher than ever because of the one-two punch of sky-high mortgage rates and rising home prices. <\/b>The average rate on a 30-year fixed mortgage was 7.07% in August. Mortgage rates have climbed even higher since then, hitting 7.57% during the week ending October 12\u2013their <\/span>highest level<\/span><\/a> in over two decades. But even though soaring mortgage rates have dampened demand, low inventory is causing home prices to increase. The typical U.S. home sold for about $420,000 in August, up 3% year over year and just about $12,000 shy of the all-time high hit in mid-2022.\u00a0<\/span><\/p>\n

The typical U.S. homebuyer\u2019s monthly mortgage payment is $2,866, an all-time high.<\/b> That\u2019s up 20% from $2,395 a year earlier, and by that time payments had already increased substantially from the beginning of the pandemic, a time of ultra-low mortgage rates and yet-to-skyrocket home prices. In August 2020, for instance, the typical monthly payment was $1,581, based on that month\u2019s average mortgage rate of 2.94% and median home price of $329,000. At that time, a homebuyer would have needed to earn $75,000 per year to afford the typical home.\u00a0<\/span><\/p>\n

The typical American household earns about $40,000 less than the income needed to buy a median-priced home. <\/b>The median household income was roughly <\/span>$75,000<\/span><\/a> in 2022, the most recent year for which annual income data is available. Hourly wages have risen in 2023, but not nearly as fast as the income necessary to afford a home is rising: The average U.S. hourly wage has increased by <\/span>about 5%<\/span><\/a> over the last year.\u00a0<\/span><\/p>\n

\u201cIn a homebuyer\u2019s ideal world, rising mortgage rates would push demand and home prices down enough to make up for high interest payments. But that\u2019s not what\u2019s happening now: Although new listings are <\/span>ticking up slightly<\/span><\/a>, inventory is still near record lows as homeowners hang onto their low mortgage rates\u2013and that\u2019s propping up prices,\u201d said Redfin Economics Research Lead Chen Zhao<\/a>. \u201cBuyers\u2013particularly first-timers\u2013who are committed to getting into a home now should <\/span>think outside the box<\/span><\/a>. Consider a condo or townhouse, which are less expensive than a single-family home, and\/or consider moving to a more affordable part of the country, or a more affordable suburb.”<\/span><\/p>\n

Affordability is less of a problem for all-cash and move-up buyers. <\/b>The major increase in income necessary to afford a home hits first-time homebuyers hardest. Buyers who can afford to pay cash aren\u2019t impacted by high mortgage rates, and they likely earn more than the income necessary to purchase a home, anyway. Buyers who are selling a home to buy another one are in a better boat than first-timers because they have likely built up equity in their current home, which takes a bit of the sting out of soaring monthly payments. The caveat to the caveat is those who bought at the height of the pandemic-era market with an ultra-low mortgage rate and need to sell now: Not only are they giving up a low rate, they also may have lost money on their home.\u00a0<\/span><\/p>\n

Metro-level highlights: Income needed to buy a home has risen in all major metros, with biggest uptick in Miami and smallest in Austin<\/h3>\n

August 2023, analysis includes 100 most populous U.S. metros for which data is available. Note that year-over-year increases in income needed to afford a home in the metro section is not adjusted for inflation. <\/span><\/i><\/p>\n