Prospective homebuyers need to earn $50,000 more than they did in 2020 to be able to afford the average US home, grim new research reveals.
Buyers must earn $106,000 to comfortably afford a property, according to data from Zillow, which analyzed the 50 largest metropolitan areas in the United States.
This is an increase of more than 80 percent from the $59,000 required in January 2020, exposing the challenges Americans face in obtaining and then paying off a mortgage.
But the amounts needed vary dramatically across the United States. In three of the most expensive cities, an annual salary of more than $200,000 is needed, an increase of at least $78,000 since before the pandemic.
See below where the lowest and highest salaries are needed to buy a house and scroll down to see a table showing the amount needed in the 50 meters…
The metro area where a buyer could comfortably afford a typical home with the lowest income is Pittsburgh, where they would need a salary of $58,232.
Prospective homebuyers must earn $50,000 more than in 2020 to afford the average U.S. home.
For the average home in the U.S., the monthly mortgage payment has nearly doubled since 2020 — a whopping 96.4 percent increase to an average of $2,188, assuming a 10 percent down payment.
Mortgage rates ended January 2020 near 3.5 percent. Although they later plummeted during the Covid-19 pandemic, successive increases in interest rates have caused them to double in recent years.
According to the latest data from government-backed lender Freddie Mac, the average for 30-year fixed-rate mortgages reached 6.94 percent as of February 29. This marked an increase for the fourth consecutive week.
In addition to higher mortgage payments, home values have also increased significantly since January 2020, creating a perfect storm for potential buyers.
According to Zillow’s analysis, home values in the United States have increased 42.4 percent in that time, to an average of about $343,000.
In 2020, a household earning $59,000 a year could comfortably afford the monthly mortgage on a typical U.S. home, spending no more than 30 percent of their income with a 10 percent down payment.
The income needed was below the U.S. median income of $66,000, meaning more than half of U.S. households had the financial means to afford homeownership.
Now, the roughly $106,000 needed to comfortably afford the mortgage payment on a typical home is well above what a typical household earns each year, which is estimated to be around $81,000.
“Housing costs have soared over the past four years as dramatic increases in home prices, mortgage rates and rental growth far outpaced wage gains,” said Orphe Divounguy, senior economist from Zillow.
“Buyers are getting creative when making a purchase, and long-distance moving companies are targeting less expensive and less competitive metropolitan areas.”
For a median-income household, it would take nearly 8.5 years before having enough savings to put a 10 percent down payment on a typical home, Zillow said, about a year longer than it would have in 2020.
It’s no surprise, then, that buyers are looking for more experimental paths to homeownership, including many younger Americans who live with their parents to save for a down payment.
“Housing costs have soared over the past four years as dramatic increases in home prices, mortgage rates and rental growth far outpaced wage gains,” said Orphe Divounguy, senior economist from Zillow.
While home values are largely rising across the United States, there is some disparity between how much Americans would need to earn to afford a home in different major metropolitan areas.
The metro area where a buyer could comfortably afford a typical home with the lowest income is Pittsburgh, where they would need a salary of $58,232, according to Zillow.
In Memphis they would need $69,976, in Cleveland they would need $70,810, in New Orleans they would need $74,048 and in Birmingham, Alabama, they would need $74,338.
Meanwhile, there are seven markets among major U.S. metropolitan areas where a household income must be $200,000 or more to comfortably afford a typical home.
The first four are in California. In San Jose, homebuyers would need an income of $454,296, in San Francisco they would need $339,864, in Los Angeles they would need $279,250, and in San Diego they would need $273,613.
This comes after former Oppenheimer analyst Meredith Whitney, pictured, told DailyMail.com that house prices will finally start to fall as more seniors start downsizing, thus freeing up housing.
According to Zillow, potential owners would need a salary of $213,984 in Seattle, $213,615 in the New York City metropolitan area and $205,253 in Boston.
But some experts predict there will be a shift in the housing market in some parts of the United States this year, driven by a rise in Baby Boomers moving into smaller properties.
Analyst Meredith Whitney, known as the ‘Oracle of Wall Street’ after she correctly predicted the 2008 financial crisis, predicted that housing prices in some states will fall in 2024.
This, in turn, will free up inventory and reduce costs for first-time buyers.
Whitney said homes in New York, New Jersey and Ohio will see a drop in prices. By comparison, homes in Texas, Tennessee and Utah will remain strong, she said.
She told DailyMail.com: ‘Around 90 per cent of the housing stock is owned by people over 40, while 74 per cent is owned by people over 50.
‘It makes logical sense that many of these owners will begin to downsize in the next decade. There are almost 35 million homes; It’s a huge number to get through the system.’
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