Income Needed to Afford a Home Rises 80% Since Pre-Pandemic, Report Finds
A recent report from Zillow has revealed that the income required to afford a home has surged by 80% since pre-pandemic levels.
Prospective homebuyers now need an annual income of over $106,000 to “comfortably afford” a home, a significant increase from the $59,000 required to afford a monthly mortgage for a typical home in January 2020.
The report highlighted that the monthly mortgage payment for a typical US home has nearly doubled during this period, reaching $2,888—a 96.4% increase. Concurrently, home values have risen by 42.4%.
During the same timeframe, median incomes have only increased by 23%, meaning that wages are not rising at the same rate that home prices are.
“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.” the report explained.
The Zillow report goes on to explain that due to the rising cost of mortgages, many millennial and Gen Z buyers are considering renting out all or part of their home for extra cash. Additionally, co-buying with friends or relatives has become a popular strategy, with 21% of last year’s buyers using this approach.
Long-distance movers are also increasingly targeting less expensive competitive metropolitan areas.
The report noted that several markets now require households to earn over $200,000 annually to comfortably afford a home. Unsurprisingly, most of these high-income markets are in California, including cities like San Jose, San Francisco, Los Angeles, and San Diego.
Conversely, the markets with the lowest income requirements include cities like Pittsburgh, Memphis, Cleveland, and New Orleans, where the cost of homeownership is significantly lower.
