The past year has seen a slight improvement in housing affordability across the United States. However, for the average person to easily buy a house, an annual income of nearly $110,000 is still needed.
According to Redfin’s latest report, in June of this year, the median income for an average American household needed to purchase a home at the median price without exceeding 30% of their income on housing expenses was $109,796. This figure, which is only 0.5% lower than the historical peak of $110,382 a year ago, indicates minimal changes in the income required to buy a house over the past year.
Redfin estimates that the median household income in the United States in June was $87,599, showing a 4% increase from the same period last year, while median home prices rose by 2.2%. Despite a slight decrease in mortgage rates, which remain around 6%, borrowing costs remain high.
Data from Redfin shows that although the increase in average household income in the United States exceeds the increase in home prices, there is still a gap of $22,200 to comfortably afford a median-priced home. While this represents an improvement from around $26,100 a year ago and nearly $28,900 two years ago, it remains a significant barrier for many potential homebuyers.
According to Redfin’s definition, housing affordability means that with a 15% down payment, monthly mortgage, property taxes, and other housing costs should not exceed 30% of monthly income.
Redfin’s senior economist, Xu Yingqi, stated in the report that while the income required to buy a house has gradually stabilized after declining in recent years, it does not mean that the average American can afford to buy a house.
Xu Yingqi mentioned that currently, most of the United States is in a buyer’s market, where buyers have more choices and greater bargaining power. However, due to the fact that the income of the average household still does not reach the level needed to easily afford a home, many potential first-time buyers remain cautious.
The report by Redfin suggests that by the end of this year, housing affordability in the United States may slightly improve. However, if interest rate hikes exceed expectations, oil prices rise further, or inflation accelerates, the situation could worsen.
The report indicates that the ratio of housing expenses to income for American buyers has improved compared to a year ago, with the cost of supplying a median-priced home for average buyers accounting for 37.6% of their income, down from 39.3% the previous year. While the median household income in the United States increased from $84,257 to $87,599, the income needed to buy a home has remained relatively unchanged.
Data also shows that in June, 34.2% of homes for sale across the United States were affordable for the median income household, up from 30.5% a year ago. However, housing affordability is still far lower than levels before 2022, when over half of the homes for sale were affordable for middle-income families.
Among the 46 major cities analyzed in the report, 24 have seen some improvement in housing affordability. Seattle saw the most significant improvement, with the cost of supplying a regular residence dropping by 7.4% compared to a year ago. San Jose and Portland also showed notable decreases, with declines of 6.5% and 4.5%, respectively.
Despite these improvements, many areas on the West Coast of the United States remain unattainable for average families. San Francisco continues to be the least affordable major city in the United States, with an annual income of up to $453,205 needed to afford a median-priced home. Only St. Louis, Indianapolis, and Pittsburgh have median household incomes exceeding the income required to afford a regular home.