Five years ago, median incomes could buy the average home in 39 large areas; today, they can only afford it in 11.
A typical U.S. home was beyond the reach of a median-income household five years ago. According to a recent Zillow analysis, even if they had $73,000 saved for a down payment, they are currently more than $17,000 short.
Amazing home value increases and rising mortgage rates in recent years have raised the financial bar for homeownership, even though the housing market is more buyer-friendly this spring with more properties for sale and a record number of sellers lowering their list prices. Pressures on affordability have increased interest in single-family rentals while reducing buyer desire.
“Affordability remains a steep hill to climb, especially for first-time buyers,” said Kara Ng, senior economist at Zillow. “While the financial bar has gotten higher, we’re also in the middle of the most buyer-friendly spring since before the pandemic for those who can make the finances work. Inventory is up, prices are softening, and sellers are negotiating. To make homeownership more broadly accessible, though, we need lasting solutions, starting with policies that allow more homes to be built in the right places.”
Buyers Struggle with Prices
Today, if a buyer has $73,594 saved for a 20% down payment, they must earn about $100,000 annually to comfortably afford a median U.S. home valued $367,969. Accordingly, a median-income household would require a raise of $17,670. That same household would need a $36,287 pay boost if their funds were just sufficient for a 10% down payment.
In four large metro regions, all in California, median earnings would require six-figure hikes. A median-income household in San Jose would require a raise of more than $250,000 to afford the average property, even if they had a staggering $330,000 saved for a 20% down payment. Additionally, median-income households in San Diego ($128,954), Los Angeles ($149,375), and San Francisco ($165,566) would require six-figure hikes.
