Buyers need to earn thousands more annually to afford a median-priced home
The typical US household still faces a major affordability gap, needing to earn an additional $29,448 annually to comfortably purchase a median-priced home, a new Redfin analysis revealed.
To purchase the typical US home priced at $412,778 in February 2024, buyers needed an annual income of $113,520. This figure far exceeds the median household income of $84,072, revealing a 35% gap.
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While this situation is a clear sign of a housing affordability crisis, there has been a slight improvement since October, when the gap was over $40,000. Buyers had to earn $120,500 – 51% more than the typical household income of $79,689.
The last time typical household income outpaced homeownership requirements was in February 2021.
“For over a decade, America has been slowly marching toward a housing affordability crisis due to chronic underbuilding, and that crisis was kicked into overdrive when the pandemic homebuying boom fueled a meteoric rise in housing prices,” said Redfin senior economist Elijah de la Campa. “Now there’s another culprit squeezing homebuyers: elevated mortgage rates.”
According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages dropped to 6.93% from 6.97% a week ago. Despite a recent softening in mortgage rates, they remain a significant factor squeezing homebuyer budgets.
Read more: Housing crisis – what can be done?
“We’re slowly climbing our way out of an affordability hole, but we have a long way to go,” de la Campa said. “Rates have come down from their peak and are expected to fall again by the end of the year, which should make homebuying a little more affordable and incentivize buyers to come off the sidelines.”
The affordability gap is a complex issue. Home prices continue to rise, up 7% year-over-year as of February, fueled by a shortage of homes for sale. Meanwhile, household incomes haven’t kept pace, increasing just 6% in the same period. This widening gap puts the dream of homeownership increasingly out of reach for many Americans.
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