The income needed to comfortably afford a home
is up 80% since 2020, while median income has risen 23% in that
time
- Those shopping for homes today need to make more than
$106,000 a year to comfortably afford
a home.
- A mortgage payment on a typical U.S. home has nearly doubled
since 2020.
- Pittsburgh, Memphis and Cleveland are the most affordable markets.
Households in California need to
make the most money to afford a home.
SEATTLE, Feb. 29,
2024 /PRNewswire/ -- Home shoppers today need to
make more than $106,000 to
comfortably afford a home, a new Zillow® analysis finds. That is
80% more than in January 2020,
showing how the math has changed for hopeful buyers, who are more
often partnering with friends and family or "house hacking" their
way to homeownership.
In 2020, a household earning $59,000 annually could comfortably afford the
monthly mortgage on a typical U.S. home, spending no more than 30%
of its income with a 10% down payment. That was below the U.S.
median income of about $66,000,
meaning more than half of American households had the financial
means to afford homeownership.
Now, the roughly $106,500 needed
to comfortably afford a typical home is well above what a typical
U.S. household earns each year, estimated at about $81,000.1
"Housing costs have soared over the past four years as drastic
hikes in home prices, mortgage rates and rent growth far outpaced
wage gains," said Orphe Divounguy, a senior economist at Zillow.
"Buyers are getting creative to make a purchase pencil out, and
long-distance movers are targeting less expensive and less
competitive metros. Mortgage rates easing down has helped some, but
the key to improving affordability long term is to build more
homes."
A monthly mortgage payment on a typical U.S. home has nearly
doubled since January 2020, up 96.4%
to $2,188 (assuming a 10% down
payment). Home values have risen 42.4% in that time, with the
typical U.S. home now worth about $343,000. Mortgage rates ended January 2020 near 3.5%, keeping the cost of a
home affordable for most households that could manage the down
payment. At the time of this analysis, mortgage rates were about
6.6%.
For a household making the median income, it would take almost
8.5 years before they would have enough saved to put 10% down on a
typical U.S. home, about a year longer than it would have in
2020.2 It's no wonder, then, that half
of first-time buyers say at least part of their down payment came
from a gift or loan from family or friends.
With the cost of a mortgage rising, most millennial and Gen Z
buyers say "house hacking" — the ability to rent out all or part of
a home for extra cash — is very or extremely important. Co-buying
with a friend or relative is another way to help with
affordability, something 21% of last year's buyers reported
doing.
Metro areas where a buyer could comfortably afford a typical
home with the lowest income are Pittsburgh ($58,232 income needed to afford a home),
Memphis ($69,976), Cleveland ($70,810), New
Orleans ($74,048) and
Birmingham ($74,338). The only major metros where a typical
home is affordable to a household making the median income are
Pittsburgh, St. Louis and Detroit.
There are seven markets among the major metros where a
household's income must be $200,000
or more to comfortably afford a typical home. The top four are in
California: San Jose ($454,296), San
Francisco ($339,864),
Los Angeles ($279,250) and San
Diego ($273,613). Seattle ($213,984), the New
York City metro area ($213,615) and Boston ($205,253) complete the list.
To help find a home within budget, home shoppers on Zillow can
filter search results by monthly cost instead of by list price. The
tool simplifies the complex calculation of translating a home's
list price into the monthly cost, factoring in the latest mortgage
rates.
Those needing a down payment boost may qualify for down payment
assistance. Home listings on Zillow include a down payment
assistance module to help shoppers see what local resources could
be available to them.
Metropolitan
Area*
|
Size
Rank
|
Income Needed
to Afford a
Mortgage,
January 2024
|
Change in
Needed
Income Since
January 2020
|
Zillow Home
Value Index
(ZHVI),
January
20243
|
Monthly
Mortgage
Payment,
10% Down4
|
Years to
Save a
10%
Down
Payment
|
Pittsburgh,
PA
|
27
|
$58,232
|
$23,675
|
$201,487
|
$1,286
|
5.3
|
Memphis, TN
|
43
|
$69,976
|
$31,717
|
$230,807
|
$1,473
|
6.9
|
Cleveland,
OH
|
34
|
$70,810
|
$30,227
|
$211,712
|
$1,351
|
6.0
|
New Orleans,
LA
|
46
|
$74,048
|
$19,203
|
$232,870
|
$1,486
|
7.0
|
Birmingham,
AL
|
50
|
$74,338
|
$31,875
|
$246,805
|
$1,575
|
6.7
|
Oklahoma City,
OK
|
41
|
$74,732
|
$31,057
|
$226,048
|
$1,442
|
6.3
|
Detroit, MI
|
14
|
$75,662
|
$31,124
|
$236,025
|
$1,506
|
6.1
|
Buffalo, NY
|
49
|
$76,884
|
$34,744
|
$242,435
|
$1,547
|
6.5
|
St. Louis,
MO
|
21
|
$76,895
|
$31,880
|
$238,231
|
$1,520
|
5.9
|
Louisville,
KY
|
45
|
$77,450
|
$31,185
|
$243,810
|
$1,556
|
6.8
|
Indianapolis,
IN
|
33
|
$82,037
|
$38,150
|
$267,301
|
$1,706
|
6.6
|
Cincinnati,
OH
|
28
|
$86,027
|
$38,050
|
$267,423
|
$1,706
|
6.8
|
Kansas City,
MO
|
31
|
$92,896
|
$40,742
|
$289,290
|
$1,846
|
7.2
|
Houston, TX
|
5
|
$95,374
|
$39,779
|
$300,955
|
$1,920
|
7.5
|
San Antonio,
TX
|
24
|
$95,767
|
$38,307
|
$283,161
|
$1,807
|
7.5
|
Columbus, OH
|
32
|
$95,821
|
$43,405
|
$297,637
|
$1,899
|
7.3
|
Milwaukee,
WI
|
40
|
$100,822
|
$42,613
|
$321,037
|
$2,049
|
8.5
|
Virginia Beach,
VA
|
37
|
$102,703
|
$43,989
|
$332,820
|
$2,124
|
8.2
|
Chicago, IL
|
3
|
$104,757
|
$39,716
|
$300,906
|
$1,920
|
6.7
|
Richmond, VA
|
44
|
$106,170
|
$47,930
|
$349,558
|
$2,231
|
7.9
|
United
States
|
0
|
$106,536
|
$47,490
|
$342,941
|
$2,188
|
8.4
|
Philadelphia,
PA
|
7
|
$109,257
|
$47,837
|
$343,102
|
$2,189
|
7.5
|
Jacksonville,
FL
|
39
|
$109,271
|
$51,617
|
$348,665
|
$2,225
|
8.2
|
Charlotte,
NC
|
23
|
$111,051
|
$55,239
|
$368,712
|
$2,353
|
9.2
|
Hartford, CT
|
48
|
$114,109
|
$52,114
|
$334,712
|
$2,136
|
7.3
|
Minneapolis,
MN
|
16
|
$114,344
|
$41,867
|
$355,511
|
$2,269
|
7.3
|
Baltimore,
MD
|
20
|
$114,348
|
$44,063
|
$367,861
|
$2,347
|
7.6
|
Atlanta, GA
|
9
|
$115,430
|
$55,989
|
$370,548
|
$2,364
|
8.0
|
Tampa, FL
|
18
|
$116,329
|
$58,577
|
$370,474
|
$2,364
|
9.8
|
Las Vegas,
NV
|
30
|
$119,529
|
$54,172
|
$407,516
|
$2,600
|
10.6
|
Dallas, TX
|
4
|
$121,398
|
$53,679
|
$366,690
|
$2,340
|
8.3
|
Orlando, FL
|
22
|
$121,418
|
$58,140
|
$386,687
|
$2,467
|
9.9
|
Nashville,
TN
|
36
|
$128,535
|
$59,508
|
$425,827
|
$2,717
|
10.1
|
Raleigh, NC
|
42
|
$130,472
|
$62,410
|
$430,562
|
$2,747
|
8.7
|
Phoenix, AZ
|
11
|
$131,322
|
$65,017
|
$447,074
|
$2,853
|
9.9
|
Providence,
RI
|
38
|
$142,928
|
$65,387
|
$449,025
|
$2,865
|
10.1
|
Austin, TX
|
29
|
$149,267
|
$65,144
|
$451,322
|
$2,880
|
8.8
|
Miami, FL
|
8
|
$151,163
|
$74,834
|
$472,970
|
$3,018
|
12.3
|
Salt Lake City,
UT
|
47
|
$154,455
|
$72,592
|
$523,832
|
$3,343
|
10.6
|
Portland, OR
|
25
|
$161,624
|
$65,664
|
$528,724
|
$3,374
|
11.0
|
Washington,
DC
|
6
|
$166,551
|
$64,078
|
$539,116
|
$3,440
|
8.2
|
Sacramento,
CA
|
26
|
$172,261
|
$69,908
|
$559,243
|
$3,569
|
11.6
|
Denver, CO
|
19
|
$172,704
|
$71,338
|
$566,692
|
$3,616
|
10.7
|
Riverside,
CA
|
13
|
$173,375
|
$81,676
|
$563,468
|
$3,595
|
12.6
|
Boston, MA
|
10
|
$205,253
|
$86,967
|
$650,890
|
$4,153
|
11.6
|
New York, NY
|
1
|
$213,615
|
$78,696
|
$627,944
|
$4,007
|
12.9
|
Seattle, WA
|
15
|
$213,984
|
$94,163
|
$697,824
|
$4,453
|
12.2
|
San Diego,
CA
|
17
|
$273,613
|
$131,018
|
$902,199
|
$5,757
|
16.9
|
Los Angeles,
CA
|
2
|
$279,250
|
$121,457
|
$918,247
|
$5,859
|
19.4
|
San Francisco,
CA
|
12
|
$339,864
|
$119,614
|
$1,104,853
|
$7,050
|
16.0
|
San Jose, CA
|
35
|
$454,296
|
$191,071
|
$1,493,255
|
$9,528
|
18.8
|
*Table ordered by income needed to afford a mortgage in
January 2024.
About Zillow Group
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate
to make home a reality for more and more people. As the most
visited real estate website in the United
States, Zillow and its affiliates help people find and get
the home they want by connecting them with digital solutions,
dedicated partners and agents, and easier buying, selling,
financing and renting experiences.
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All marks herein are owned by MFTB Holdco, Inc., a Zillow
affiliate. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS
#10287 (www.nmlsconsumeraccess.org). © 2023 MFTB Holdco, Inc., a
Zillow affiliate.
1 Median household income is taken
from the American Community Survey (ACS) through 2022. Present-day
estimates combine changes in the Employment Cost Index provided by
the Bureau of Labor Statistics to forecast current median household
income.
2 Years to save figures assume a
household saves 5% of its total income each month.
3 Smoothed and seasonally adjusted
ZHVI.
4 Monthly mortgage payment includes
principal and interest as well as estimated taxes and insurance for
a 10% down payment on a home priced at that region's ZHVI.
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SOURCE Zillow