The average household in the U.S. needs to bring in $29,448 more in income to afford the median-priced home, a new report from Redfin revealed.
Redfin’s analysis of February’s median household income and monthly mortgage payment shows an improvement in affordability from October 2023, when mortgage rates hit their highest level in 23 years. At that time, the typical American household earned a record $40,810 less than it needed to afford the median-priced home.
Despite the improvement made over four months, housing affordability is still considered a major crisis in this country.
“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. We’re slowly climbing our way out of an affordability hole, but we have a long way to go. 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.”
February’s median-priced home in the U.S. cost $412,778, and buyers needed $113,520 in annual income to afford it – 35% more than the median household income of $84,072. When this gap was at a record high last October, buyers of the median-priced U.S. home needed to earn 51% more than the typical household.
Mortgage rates remain elevated as home prices continue their upward movement in early spring. With housing costs accelerating faster than household incomes, it’s pricing many Americans out of homeownership.
The median monthly housing payment for homebuyers was $2,838 in February, down from a record high of $3,012 in October but up 12% year over year.
The median household income has increased 6% over the last year, half as much as the income needed to afford the median-priced home.
