For many Americans, homeownership is becoming increasingly unattainable due to high mortgage rates and escalating home costs stretching potential purchasers’ budgets to their limit.
To afford a home priced at the current national median of $431,250, as reported by Realtor.com for April, buyers must have an annual income of at least $114,000 based on their earnings data released on Thursday.
This analysis presumes that a home purchaser will contribute a 20% down payment, cover the remainder through a 30-year fixed-rate mortgage, and ensure that their housing expenses do not surpass 30% of their total monthly earnings—a commonly referenced indicator for determining housing affordability.
According to recent data from the United States, homebuyers now require an additional annual income of $47,000 to purchase a home compared to what they needed just six years ago. Six years back, the median home listing price in the U.S. stood at $314,950, with the typical interest rate for a 30-year mortgage being approximately 4.1%. Currently, however, this rate has climbed to an average of 6.76% this week.
In May 2022, the yearly earnings needed to purchase an average-priced American house surpassed the six-figure mark for the first time and has remained above this threshold ever since. As reported by the U.S. Census Bureau, the typical household income stood at roughly $80,600 per year in 2023.
Across various metropolitan regions such as San Francisco, Los Angeles, New York, and Boston, the yearly income required to manage the cost of an average-priced house exceeds $200,000. For those aiming for a similar property in San Jose, this figure climbs above $370,000 annually.
Rock-bottom mortgage rates turbocharged the housing market during the pandemic, fueling bidding wars for homes that pushed up sale prices sometimes hundreds of thousands of dollars above a seller initial asking price. U.S. home prices soared more than 50% between 2019 and 2024.
The
U.S. housing market
has been in a sales slump since 2022, when mortgage rates began to climb from their pandemic-era lows. Sales of previously occupied U.S. homes fell last year to their lowest level in nearly 30 years. In March, they posted their largest monthly drop since November 2022.
Not everything is bleak for those looking to buy homes.
Home values are increasing at a significantly slower pace compared to the frenzied period of the pandemic-driven real estate market. In March, the nationwide median sale price for a pre-owned American house climbed by 2.7%, reaching $403,700—a record figure for March—but this was also the lowest yearly growth rate observed since August.
In April, the median price of a home listed for sale increased by just 0.3% compared to the previous year, as reported by Realtor.com.
Homebuyers with the means to cover today’s mortgage rates find they have more options available to them now compared to what was offered a year ago.
Active listings—a count of all properties available for purchase excluding those under contract—rose by 30.6% compared to the previous year, as reported by Realtor.com. In cities like San Diego, San Jose, and Washington D.C., home listings increased significantly, ranging from 67.6% to 70.1%.
With properties taking longer to sell, an increasing number of sellers are lowering their asking prices. According to data from Realtor.com, approximately 18% of listings experienced a price reduction last month.
Sellers are showing increased flexibility with their prices, as evidenced by the decreases observed recently. Although elevated mortgage rates are undoubtedly affecting demand negatively, there’s a positive aspect: The market appears to be readjusting itself. This situation might present chances for purchasers who are ready,” stated Danielle Hale, the chief economist at Realtor.com.
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