Americans hoping to buy a median-priced home now need to earn nearly $120,000 to be able to purchase a house, according to a new report.
Home prices in the US have increased by 47% since early 2020. Rental prices have also increased by 26% in the same period. In addition, mortgage rates have remained elevated, hitting 6.87% in the week ending June 20, per Freddie Mac.
The high home prices and mortgage rates are now pricing out many Americans from the housing market. In fact, a newly published report from Harvard University's Joint Center for Housing Studies found that an individual looking to buy a median-priced home would need to earn an annual income of at least $119,800 to comfortably afford the house.
In the study, a house is "comfortably affordable" if the buyer is not required to spend more than 30% of their income on housing costs.
How Many Americans Can Afford To Buy a Home?
The research noted that only 14.5% or 6.6 million individuals of the country's 45 million renter households can meet the income threshold. That is down from 7.7 million in early 2023 and 10.2 million in 2022.
"To afford such a high payment under common payment-to-income ratios, a borrower would need an annual income of at least $119,800, a threshold just one in seven (6.6 million) of the nation's 45 million renter households can meet," the report noted.
That figure does not yet include the 3.5% down payment and 3% closing costs. With those included, only 5.8% or 2.6 million renter households could afford a median-priced home.
The high prices and elevated mortgage rates has also affected the growth of homeownership rate across all ages in the US. Last year, the homeownership rate only increased by 0.1%, marking the lowest increase recorded since 2016. Consequently, the number of homeless or unhoused individuals rose to a record 653,100 last year, the report noted.
"The low interest rates that helped shield homebuyers from rapidly rising home prices have disappeared ... Consequently, homeownership is less affordable than it has been in decades," the report added.
