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U.S. Home Affordability Reaches All-Time Low, Requiring $115,000 Income

U.S. Home Affordability

The American dream of homeownership is slipping out of reach for many, as prospective homebuyers now require an annual income of approximately $114,627 to afford the typical home. This amount marks a staggering 15% increase in just a year and exceeds the average household income by nearly $40,000, based on the most recent data from the U.S. Census Bureau, where the average worker earned around $75,000 in 2022.

These alarming statistics were unveiled in the latest data from real estate firm Redfin, indicating that, in August 2022, the typical U.S. home sold for roughly $420,000—a 3% year-over-year increase, coming just $12,000 shy of the all-time high reached in mid-2022. In the same month last year, Americans needed an income of $99,342 to afford the median-priced home, according to Redfin’s calculations.

The surging housing costs are a result of the combination of soaring mortgage rates and rapidly escalating property prices. The average 30-year mortgage rate has climbed to 7.57%, resulting in a record-high monthly mortgage payment of $2,866.

Amid this challenging landscape, Redfin’s economics research lead, Chen Zhao, noted that the market is particularly tough for first-time buyers. She advises prospective buyers, particularly first-timers, to consider alternatives such as condos, townhouses, or exploring more affordable regions or suburbs.

While mortgage rates have surged, driving up the income required for homeownership in all of the 100 most populous metropolitan areas, certain pandemic-driven hotspots in Texas, Utah, and Idaho have seen the smallest increases.