American households looking to buy a home would need to earn at least a six-figure income to afford a median-priced house amid rising mortgage rates and real estate prices, according to a report.
As of August 2023, the average house cost in the United States was $420,000. This means the buyer must have an annual income of at least $114,627 to afford a new median-priced home, per the latest analysis conducted by Redfin.
It is the highest recorded annual income necessary to afford a home in the U.S. It is also 40% higher than the average household income in the country and almost twice as high as the average salary in the U.S. The average annual salary nationwide is currently at $59,428, according to Forbes.
In comparison, the average American needed an annual income of $99,342 to afford a home in 2022, $74,657 in 2020, and $51,784 in 2012.
The analysis also found that a six-figure income is now needed to buy a median-priced home in at least 50 U.S. cities. Bay Area buyers, in particular, must earn $400,000 annually to afford a median-priced home in their area.
In contrast, Detroit homebuyers would only need to earn $52,000 to afford a median-priced property in the area. While the city has the lowest income required to afford a home in the U.S., the income threshold has still increased by 19% from a year ago.
The surging home prices in the US are largely driven by the rising mortgage rates, which are now at 7.5%. The mortgage rates are now expected to move down to 3%, seen during the COVID-19 pandemic.
"Mortgage rates may move lower at some point, but we're not going back to 3% - the 2020 levels are not going to go back," Bankrate.com's chief financial analyst Greg McBride said, as quoted by CBS News.
That being said, the average rate on a typical 30-year mortgage has seen two consecutive weekly drops, falling by 2 basis points last week to 7.61% from 7.86%.
