How much money you need to earn to afford a home in 49 U.S. cities

The latest data on U.S. workers’ pay shows a promising increase of around 4% this year, with median household income reaching approximately $88,000 in April. However, despite this positive news, a significant gap still exists when it comes to affording a home in America. Online real estate firm Redfin estimates that Americans need to earn a minimum of $116,780 annually to be able to afford the average home.

The average cost of a home in the U.S. is nearly $418,000, according to the National Association of Realtors. This means that a household earning the median U.S. income would need to allocate 40% of their earnings towards purchasing the median-priced home. Financial experts typically recommend keeping monthly mortgage payments below 30% of annual income after making a 15% down payment.

Nancy Vanden Houten, lead U.S. economist at Oxford Economics, expressed concerns about the ongoing unaffordability of homeownership in the country, predicting that this trend is likely to persist over the next decade. Redfin’s data highlights that the median salary of $88,000 falls short of the income needed to purchase a home in 41 out of the 49 most populous U.S. cities.

In cities like San Francisco and San Jose, where housing prices are inflated due to the tech industry boom, the income required to afford a home surpasses $400,000. On the other hand, there are still some cities, particularly in the Midwest, where a median income of $88,000 is sufficient to purchase a home. Detroit, for example, offers more affordable housing options, with a household needing to earn $56,219 to buy a home.

Despite some slight improvements in housing affordability over the past six months, homeownership remains out of reach for many Americans. A CBS News poll revealed that over 80% of respondents believe that buying a home is more challenging now compared to previous generations. Vanden Houten emphasized that disparities in home price-to-income ratios contribute to the varying levels of affordability across different states.

Overall, the housing market continues to present challenges for aspiring homeowners, with millions of individuals finding it increasingly difficult to secure a place of their own. As the gap between incomes and housing prices persists, finding sustainable solutions to improve affordability remains a pressing issue for policymakers and industry experts.