US Residents Now Need to Make Six Figures to Buy a Home
Home prices outpacing wage growth, rising interest rates, and a supply shortage create challenges.
One in five aspiring homeowners think they will never be able to save enough to purchase a home, according to Bankrate’s Down Payment Survey.
Because wages haven’t kept pace with home prices and interest rates are considerably higher than pre-2020, purchasing a home has become increasingly expensive, and millions of Americans, especially young people, “feel locked out of homeownership,” according to the report.
Homebuying costs have risen by about 50 percent since January 2020 and wages grew just 23 percent between the fourth quarter of 2019 and November 2023, according to a Center for American Progress analysis of Bureau of Labor Statistics data.
As for mortgage rates, they are three full percentage points higher in the past few years. In January 2020, the average 30-year fixed rate was 3.68 percent, compared to 7.07 percent as of March 20, according to Bankrate’s survey of large lenders.
Additionally, homes for sale are in short supply. Many homeowners locked in ultra-low low mortgage rates during the pandemic and are staying put to avoid today’s soaring mortgage rates, shrinking the pool of available homes for sale.
Americans need an annual income of $110,871, up 46 percent since the start of 2020, to afford a median-priced home of $402,343. Americans must earn at least $100,000 annually to afford a median-priced home in 22 states and the District of Columbia.
It’s worse for those in the West and Northeast. There, anyone looking to buy in California, Hawaii, District of Columbia, Massachusetts, and Washington must earn between $156,814 and $197,057.
It’s easier for those in the South and Midwest. Anyone looking to buy in Mississippi, Ohio, Arkansas, Indiana and Kentucky must earn between $63,043 and $65,186.
The five states where the annual income needed to afford a typical home has increased the most since the beginning of 2020 are Montana (+77.7%), Utah (+70.3%), Tennessee (+70.1%), South Carolina (+67.3%), and Arizona (+65.3%).
The five states where the annual income needed to afford a typical home has increased the least since the beginning of 2020 are North Dakota (+9.2%), the District of Columbia (+24.6%), Louisiana (+24.9%), Illinois (+27.2%), and Kansas (+29.3%).
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