KEY TAKEAWAYS
- Home prices are currently at a record high. As a result, the median American can only reasonably afford to buy a house in just three of the 50 largest metro areas.
- A typical person must make at least $117,204 a year to meet the standard affordability benchmark of spending 30% or less of their income on housing.
- Because wages haven’t climbed as fast as housing prices, many Americans are moving to more affordable areas.
It’s becoming harder for Americans to find a home they can reasonably afford to buy on their income.
Only three of the 50 largest U.S. metro areas are affordable for the median homebuyer: Pittsburgh, Detroit, and St. Louis. In those areas, American buyers are able to follow the standard affordability benchmark, which dictates that people should spend no more than 30% of pre-tax income on housing.
Median home-sale prices recently hit a new record high, which means more homebuyers have to spend more than a third of their income on housing. And prices are expected to keep rising. The monthly payments on a median American home would now cost the typical household 44.6% of their income, according to calculations by Realtor.com.
That means the typical American would need to make at least $117,204 to meet the 30% affordability benchmark. That’s in line with other reports, including a Harvard University study that found a first-time homebuyer would need to make at least $126,700 a year to afford the median monthly home payment.
Wages Haven’t Kept Up With Home Prices
A combination of high home prices, elevated mortgage rates, and low housing inventory has made it harder for homebuyers to find a mortgage they can afford.
Meanwhile, wages have only increased by 1.6% since 2020, according to data from the Bureau of Labor Statistics. At the same time, home prices have climbed much faster, jumping 26.7% over the past five years, according to the Census Bureau.
For that reason, many homebuyers are moving to the Midwest in search of cheaper prices that align with their wages.