Real Estate Brokerage Redfin stated on February 11 that Americans now need at least $111,252 in annual income to afford a typical home for sale nationwide, a 4% decrease from a year ago.
According to Redfin, since November, the income required for purchasing a home has been steadily decreasing, bringing some relief to American homebuyers. Prior to this, the income needed for buying a home had been increasing almost every month compared to a year ago, a trend that had persisted for five years, mainly due to the surge in home prices during the pandemic.
The brokerage firm pointed out that the required annual income of $111,252 has dropped from its peak of $122,000 in June of last year.
Chen Zhao, Redfin’s chief economist, stated, “While housing prices remain at historic highs, the trend is finally beginning to reverse, with the door to homeownership slightly opening up instead of continuing to tighten. Despite improving affordability, Americans still face other hurdles in buying homes, such as concerns about layoffs and economic uncertainty.”
Redfin attributed the improvement in nationwide housing affordability to stable sales prices and declining mortgage rates. Currently, the median price for homes for sale is $426,747, “just slightly higher than last year.”
According to data from Freddie Mac, the average interest rate for 30-year fixed-rate mortgages was 6.09% from February 6 to 12, lower than 6.87% a year ago.
Since October 2024, rates had remained above 6.5% every week until September last year when this pattern was broken, and rates have stayed below that level since.
Freddie Mac’s chief economist, Sam Khater, stated on February 12 that with mortgage rates at a three-year low, a stable labor market, and robust economic growth, housing affordability continues to “meaningfully improve.”
Khater added that these factors have encouraged homebuyers, resulting in increased mortgage applications compared to a year ago.
Based on Redfin’s data, the decrease in housing costs has lowered the median monthly mortgage payment from $2,800 a year ago to the current $2,675. The brokerage firm noted that in the 50 most densely populated metro areas they evaluated, 37 regions showed an improvement in housing affordability. Dallas saw the largest affordability improvement, followed by Sacramento in California and Jacksonville in Florida.
According to a report released by Bright MLS on February 2, over 90% of Americans now view housing affordability as a pressing issue.
The report, based on a survey of over 3,000 Americans, found that higher mortgage rates and lower personal incomes were seen as the main reasons for concerns over housing affordability.
Many Americans believe that a lack of housing supply is a “key constraint” on affordability. The report indicated that 43.2% of respondents felt “not enough lower-priced housing is being built.”
In a statement released on January 22, the National Association of Home Builders (NAHB) urged Congress to reduce regulatory burdens to improve housing affordability.
NAHB Chairman Buddy Hughes stated at a congressional hearing, “Excessive regulations are hindering the construction of new single-family homes and apartments.”
Hughes mentioned, “Regulations account for nearly 25% of the cost of a single-family home and over 40% of typical apartment development costs.”
He further explained, “The time and cost required to comply with numerous government regulations can be substantial for small to medium-sized builders, ultimately limiting housing supply.”
Meanwhile, the Trump administration has taken steps to alleviate housing affordability issues. Last month, President Trump signed an executive order limiting Wall Street companies from purchasing single-family homes in the U.S.
In the order, Trump wrote, “Hard-working young families cannot effectively compete for starter homes with Wall Street companies and their vast resources. Communities and neighborhoods once controlled by middle-class American families are now dominated by distant corporate capital.”
In a television address in December, Trump announced plans to unveil “some of the most ambitious housing reforms in American history.”
The President indicated that he would appoint a new Federal Reserve chairman to support lowering the central bank’s benchmark interest rates. Under new central bank leadership, a decrease in rates would lead to lower mortgage rates.
On January 30, the President announced that former Federal Reserve Board member Kevin Warsh would succeed Jerome Powell as the next Federal Reserve chairman.
Trump told reporters, “Warsh is certainly inclined to cut interest rates. I’ve been watching him for a long time.” Powell’s term is set to expire in May.