Buyers need to earn $114,000 to afford the
typical U.S. home—35% more than the typical household makes. But
that’s an improvement from October, when buyers needed to earn a
record $121,000—51% more than the median household income.
(NASDAQ: RDFN) — The typical U.S. household earns $29,448 less
than it needs to afford the median-priced home, according to a new
report from Redfin (redfin.com), the technology-powered real estate
brokerage.
While that’s a sign of a major housing affordability crisis, it
marks an improvement from October, when the typical household
earned a record $40,810 less than it needed as mortgage rates hit
the highest level in 23 years.
That’s based on a Redfin analysis of the estimated median U.S.
household income and median monthly housing payments as of February
2024.
Buyers needed to earn an annual income of $113,520 to afford the
median-priced U.S. home in February ($412,778). That’s 35% more
than the $84,072 median household income.
In October, when the mismatch between median income and the
income needed to afford a home was highest, homebuyers needed to
earn $120,500 to afford the typical home. That was a record 51%
more than the $79,689 earned by the typical household.
February 2021 was the last month on record when the typical
household earned more than it needed to afford the median priced
home. Back then, the median household income was $69,021—6% higher
than the $65,292 needed to afford the typical home.
“For over a decade, America has been slowly marching toward a
housing affordability crisis due to chronic underbuilding, and that
crisis was kicked into overdrive when the pandemic homebuying boom
fueled a meteoric rise in housing prices,” said Redfin Senior
Economist Elijah de la Campa. “Now there’s another culprit
squeezing homebuyers: elevated mortgage rates. We’re slowly
climbing our way out of an affordability hole, but we have a long
way to go. Rates have come down from their peak, and are expected
to fall again by the end of the year, which should make homebuying
a little more affordable and incentivize buyers to come off the
sidelines.”
Home sales fell to the lowest level in roughly three decades
last year as elevated mortgage rates pushed homeownership out of
reach for many Americans—especially first-time buyers, who haven’t
built up equity from the sale of a previous home. Many Americans
remain priced out of homeownership because rates remain elevated,
and home prices continue climbing (they rose 7% year over year in
February) due to a shortage of homes for sale.
Housing Affordability Remains Near Historic Lows as Housing
Costs Grow Twice as Fast as Incomes
The $113,520 income needed to afford the median priced home in
February was up 12% from a year earlier—the biggest annual gain
since August—and still wasn’t far below October’s all-time high. It
was up 39% from February 2022 and up 74% from February 2021, when
mortgage rates were near their all-time low of 2.65%.
Affordability is strained today because housing costs are rising
much faster than incomes. The median household income has increased
6% over the last year, half as much as the income needed to afford
the median-priced home.
The median monthly housing payment for homebuyers was $2,838 in
February, down from a record high of $3,012 in October but up 12%
year over year.
Metros with smallest increases in income needed to afford a
home
In San Antonio, homebuyers in February needed to earn 1% more
than a year earlier to afford the typical home—the smallest
increase among the metros Redfin analyzed. Next came Detroit (3%),
Austin, TX (4%), Fort Worth, TX (5%) and San Francisco (6%).
Home prices in Texas are soft, which is why many metros in the
Lone Star State are seeing relatively small gains in the income
needed to afford a home. The median home sale price in San Antonio
fell 4% year over year in February, making it the only major metro
that posted a decline. And prices in Fort Worth and Austin were up
by less than 1%, making them some of the smallest gainers in the
nation.
Texas has been building more homes than any other state, which
has put downward pressure on prices because it means homebuyers
have more options to choose from. Housing supply in Fort Worth
jumped 14% year over year in February, one of the biggest increases
in the U.S. In Austin, the housing market has also lost steam
because an influx of out-of-towners in recent years drove housing
costs to unsustainable heights, leaving many buyers priced out.
Metros with largest increases in income needed to afford a
home
In Anaheim, CA, homebuyers in February needed to earn 20% more
than a year earlier to afford the typical home—the biggest jump in
the nation. Next came West Palm Beach, FL (18%), Fort Lauderdale,
FL (18%), New Brunswick, NJ (18%) and San Diego (17%).
These metros have seen some of the biggest jumps in home prices,
which is driving up the income needed to afford a home. Anaheim,
the third most expensive homebuying market in the country, saw its
median sale price surge 16% year over year in February—the second
largest increase in the nation. West Palm Beach and Fort Lauderdale
ranked third and fourth, both posting price increases of 13%.
There are 13 major metros where homebuyers can afford the
typical home while making less than six figures
In Detroit, the typical household needed to earn $46,168 to
afford the median priced home in February, making it the most
affordable market in the country. It was followed by Cleveland
($58,186), Pittsburgh ($61,603), St. Louis ($66,755) and
Philadelphia ($73,182). The other metros where homebuyers making
less than $100,000 can afford the typical home are: Indianapolis,
Warren, MI, Cincinnati, Milwaukee, Kansas City, MO, Virginia Beach,
VA, San Antonio and Columbus, OH.
There are 11 major metros where homebuyers make more than
they need to afford a home
The typical Detroit household earns $64,018, or 39% more than
the $46,168 needed to afford the $165,000 median priced home. Next
comes Pittsburgh, where the typical household earns 30% more than
it needs to afford a home, followed by Cleveland (29%), St. Louis
(29%) and Warren (21%). The other metros where the typical
household earns more than it needs to afford a home are:
Indianapolis (11%), Cincinnati (20%), Baltimore (9%), Milwaukee
(5%), Kansas City (4%) and Minneapolis (4%).
There are seven metros where the typical household earns over
50% less than it needs to afford a home
In Los Angeles, the typical household earns $93,315, or 60% less
than the $236,079 needed to afford the $874,800 median priced home.
The other metros where the typical household earns over 50% less
than needed to afford a home are: Anaheim (58% less), San Francisco
(58%), San Jose, CA (55%), San Diego (55%), New York (52%) and
Miami (51%).
To view the full report, including charts and methodology,
please visit:
https://www.redfin.com/news/income-needed-to-afford-home-february-2024
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate
company. We help people find a place to live with brokerage,
rentals, lending, title insurance, and renovations services. We run
the country's #1 real estate brokerage site. Our customers can save
thousands in fees while working with a top agent. Our home-buying
customers see homes first with on-demand tours, and our lending and
title services help them close quickly. Customers selling a home
can have our renovations crew fix it up to sell for top dollar. Our
rentals business empowers millions nationwide to find apartments
and houses for rent. Since launching in 2006, we've saved customers
more than $1.6 billion in commissions. We serve more than 100
markets across the U.S. and Canada and employ over 4,000
people.
Redfin’s subsidiaries and affiliated brands include: Bay Equity
Home Loans®, Rent.™, Apartment Guide®, Title Forward® and
WalkScore®.
For more information or to contact a local Redfin real estate
agent, visit www.redfin.com. To learn about housing market trends
and download data, visit the Redfin Data Center. To be added to
Redfin's press release distribution list, email press@redfin.com.
To view Redfin's press center, click here.
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version on businesswire.com: https://www.businesswire.com/news/home/20240326867757/en/
Redfin Journalist Services: Ally Braun, 206-588-6863
press@redfin.com
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