New homebuyers must make an average annual salary of $115,000 to afford the average United States home, according to recent studies from Redfin. That’s about $40,000 more than the typical American household earns.
Nationally, home prices are up 15% from only a year ago and 50% since the start of the pandemic. In August, the average U.S. home sold for about $420,000, rising 3% year over year.
In 2022, the median household income was around $75,000. While the average U.S. hourly wage rose 5% over the last year, that’s not enough to keep up with the increasing costs of affording a home.
Salary to buy a home has risen in all major metros
Homebuyers now must earn at least six figures to buy a home in half the country’s major metros and in five metros, the necessary income has increased by over 30%. They are:
2. Newark, New Jersey
3. Bridgeport, Connecticut
4. Dayton, Ohio
5. Rochester, New York
Both Miami and Newark showed the biggest increases; homebuyers must earn 33% more than one year ago to afford the typical home in both cities. Miami homebuyers must earn $143,000 annually to afford the typical monthly mortgage payment of $3,580, while Newark homebuyers must earn $160,000 to afford $3,989 monthly.
Meanwhile, in San Francisco and San Jose, California — the two most expensive markets — buyers must earn $400,000 annually to afford the typical monthly mortgage.
The average U.S. monthly mortgage is at an all-time high
Mortgage rates have continued climbing since August when they were at an average fixed rate of 7.07%. As of Nov. 10, they reside at 7.69%, the highest amount in over two decades. On top of that, low inventory is driving up housing costs.
The average monthly mortgage payment is now $2,866, the highest it’s ever been. Payments have also increased substantially since the beginning of the pandemic. In August 2020, the typical monthly payment was $1,581.
“In a homebuyer’s ideal world, rising mortgage rates would push both demand and home prices down, at least enough to make up for high interest payments,” Redfin Economics Research Lead Chen Zhao said in the report.” “But that’s not what’s happening now.”
Zhao explained: “Although new listings are ticking up slightly, inventory is still near record lows as homeowners hang onto their low mortgage rates — and that’s propping up prices.”
Overall though, the income needed to afford the typical home has increased across the country, even in places where prices declined over the past year.