Redfin: Typical Household Earns $30,000 Less Than Needed to Afford Median-Priced Home

(Illustration courtesy of Redfin)

Buyers need to earn $114,000 to afford the typical U.S. home–35% more than the typical household makes, according to Redfin, Seattle.

But that represents an improvement from late last year, when buyers needed to earn a record $121,000–51% more than the median household income, Redfin noted in a new report.

The typical U.S. household earns $29,448 less than it needs to afford the median-priced home, the report found.

“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,” Redfin Senior Economist Elijah de la Campa said.

de la Campa noted another culprit squeezing homebuyers at the moment: elevated mortgage rates. “We’re slowly climbing our way out of an affordability hole, but we have a long way to go,” he 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.”

February 2021 was the last month on record when the typical household earned more than it needed to afford the median priced home, the report said. Back then, the median household income was $69,021–6% higher than the $65,292 needed to afford the typical home. Redfin said home sales fell last year to the lowest level in roughly three decades last year as elevated mortgage rates pushed homeownership out of reach for many Americans—especially first-time buyers, who haven’t built up equity from the sale of a previous home.

“Many Americans remain priced out of homeownership because rates remain elevated, and home prices continue climbing (they rose 7% year over year in February) due to a shortage of homes for sale,” the report said.