Home buyers need to earn $47,000 more than in 2020 per Zillow

Home buyers need to earn $47,000 more than in 2020 per Zillow.


Today, homebuyers need an income of over $106,000 to comfortably afford a home, according to a recent analysis by Zillow. This is an 80% increase from January 2020, highlighting the changing landscape for prospective buyers, many of whom are turning to creative solutions such as partnering with friends and family or "house hacking" to achieve homeownership.

In 2020, a household earning $59,000 could comfortably afford the monthly mortgage on an average U.S. home, spending no more than 30% of its income with a 10% down payment. This was below the U.S. median income of about $66,000, indicating that more than half of American households had the financial capacity to own a home.

However, the current threshold of approximately $106,500 needed to comfortably afford a typical home now exceeds the annual income of a typical U.S. household, estimated at around $81,000.

"Housing costs have surged over the past four years, with significant increases in home prices, mortgage rates, and rent growth outpacing wage growth," said Orphe Divounguy, a senior economist at Zillow. "Buyers are finding innovative ways to make a purchase feasible, and long-distance movers are targeting more affordable and less competitive areas. While lower mortgage rates have provided some relief, the key to long-term affordability improvement is increasing home construction."

The monthly mortgage payment on an average U.S. home has nearly doubled since January 2020, rising by 96.4% to $2,188 (assuming a 10% down payment). Home values have also increased by 42.4% during this period, with the typical U.S. home now valued at about $343,000. Mortgage rates stood at around 3.5% in January 2020, making homeownership affordable for most households able to manage the down payment. At the time of the analysis, mortgage rates were approximately 6.6%.

For a household earning the median income, it would take almost 8.5 years to save enough for a 10% down payment on a typical U.S. home, which is about a year longer than in 2020. Consequently, half of first-time buyers say that at least part of their down payment came from a gift or loan from family or friends.

As mortgage costs rise, many millennial and Gen Z buyers view "house hacking" — the ability to rent out all or part of a home for extra income — as crucial. Co-buying with a friend or relative is another affordability strategy, cited by 21% of last year's buyers.

Among major metro areas, Pittsburgh requires the lowest income to afford a typical home ($58,232), followed by Memphis ($69,976), Cleveland ($70,810), New Orleans ($74,048), and Birmingham ($74,338). Only Pittsburgh, St. Louis, and Detroit are major metros where a typical home is affordable to a household earning the median income.

Conversely, there are seven major metro markets where a household needs an income of $200,000 or more to comfortably afford a typical home. These include San Jose ($454,296), San Francisco ($339,864), Los Angeles ($279,250), San Diego ($273,613), Seattle ($213,984), the New York City metro area ($213,615), and Boston ($205,253).