Here’s how much you need to earn to afford a home in the U.S.

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For many, the American dream and homeownership are synonymous – life, liberty, and the pursuit of property! Not to mention, home ownership is key to creating generational wealth. And yet, it’s getting harder and harder to attain.

The Widening Gap

The typical American household has had to rework its budget recently as a wave of high inflation swept the nation following the pandemic. But home values were on the rise even before the inflation popped, meaning prospective buyers needed to put more money on the table, and save more for down payments.

Jessica Lautz, the National Association of Realtors® (NAR) deputy chief economist and vice president of research, attributes the erosion of housing affordability to higher home prices and mortgage rates, making it harder than ever for first-time buyers to enter the market. In a recent NAR report, Lautz noted more affluent buyers continue to dominate today’s still-competitive market by offering larger down payments and paying cash.

Case in point, NAR data shows the annual household income of buyers who purchased homes between July 2022 and June 2023 jumped nearly $20,000 — from $88,000 to $107,000 — topping six figures for only the second time since 1981.

To put these numbers in context, the median household income in the U.S. is just under $75,000, according to the Census Bureau. Yet, when looking at average home prices and mortgage rates across the 50 largest metropolitan areas in the U.S., an income in excess of $75,000 is necessary in 42 areas. In the four most expensive markets — all in California — an average of $320,000 is needed to buy a home. Even at the other end of the spectrum in the Rust Belt, where buyers need the least to buy a home, homebuyers must earn an average of $65,000 to afford a median-priced home, up 19% from 2022.

A Dream Deferred

Higher income requirements are making homeownership more of a distant reality for those in greatest need of a financial boost. The New York Times recently reported millennials are likeliest to be raising children, but boomers have all the houses. The younger generation has routinely deferred milestones in response to economic forces, and those who don’t own homes are worried they never will, citing wage stagnation, inflation, and student loan debt as the biggest roadblocks to homeownership.

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