Today's high home prices and mortgage rates mean the typical household is more than $20,000 a year short of the income needed to buy a median-priced home.
That's according to mortgage data firm HSH, which estimates that as of the second quarter, a household would need an income of $105,324 to buy a typical home. As of 2021, the median household income was just $70,784, according to the Census Bureau. As the graph below shows, recent increases in the cost of buying a home have significantly reduced income.
HSH statistics also show that housing is the most affordable it has been in at least a decade, largely due to higher mortgage rates driven by the Federal Reserve's anti-inflation rate hike campaign. This is consistent with the indicators.
The Atlanta Fed's housing affordability index has fallen sharply in 2021, hovering near its all-time low reached in October. According to the Atlanta Fed, housing is less affordable today than it was in 2006, when a real estate bubble drove prices to unsustainable levels.
Median household income is outdated, and workers received large raises in 2022 and 2023. However, according to the Bureau of Labor Statistics, if median household income grew at the same rate as median weekly pay, household income in 2023 would be: At $78,781, homeownership is still out of reach.
HSH estimates assume that to be affordable, housing payments, including insurance and taxes, need to be 28% or less of household income. You can also buy a home for a median price of $402,600, according to the National Association of Realtors, with a 20% down payment and a 30-year fixed-rate mortgage from Freddie Mac with an average interest rate of 6.51%. Since then, mortgage rates have further increased to over 7%, further worsening mortgage affordability.
