Home buyers need to earn $47,000 more than in 2020
- None.
- None.
Insights
The significant disparity between the increase in income needed to afford a home compared to the rise in median income highlights the growing affordability crisis in the U.S. housing market. An 80% increase in the required income to comfortably afford a home since 2020, juxtaposed with a 23% rise in median income, suggests that housing prices are outpacing income growth at an alarming rate.
This trend has critical implications for the economy, as it can lead to a reduction in home ownership rates, increased demand for rental properties and potential stagnation in consumer spending due to higher proportions of income being allocated to housing costs. The widening gap may also exacerbate socioeconomic disparities, as access to homeownership becomes increasingly concentrated among higher-income individuals.
From an economic perspective, the housing affordability crisis could influence monetary policy decisions, as central banks may face pressure to address rising inflation in the housing sector. Additionally, this trend could impact labor mobility, as individuals may be less inclined to relocate for employment opportunities due to the high cost of housing in certain regions.
The data indicating that mortgage payments on a typical U.S. home have nearly doubled since 2020 provides insight into the shifting dynamics of the real estate market. With Pittsburgh, Memphis and Cleveland cited as the most affordable markets and California requiring the highest income to afford a home, we observe significant regional variations in housing affordability.
These disparities can influence population migration patterns, with potential impacts on local economies and real estate markets. Areas with more affordable housing may attract a larger workforce, potentially leading to economic growth and increased demand for local services. Conversely, regions where housing affordability is a significant issue might experience a talent drain, as workers seek more cost-effective living conditions elsewhere.
Understanding these market dynamics is crucial for real estate investors, developers and policymakers. Stakeholders need to consider the long-term implications of current trends and explore strategies to increase housing affordability, such as revising zoning laws, investing in affordable housing developments, or offering financial assistance programs to first-time homebuyers.
The data provided suggests a substantial increase in the financial burden on prospective homebuyers, which could have a ripple effect on the broader economy and the stock market. As housing costs consume a larger portion of household incomes, discretionary spending may decrease, potentially affecting the retail sector, consumer goods and services industries.
In the short term, the real estate and construction sectors might experience a surge in activity due to high demand and limited supply, which could benefit companies within these industries. However, if the trend continues and home affordability remains a challenge, it may lead to a market correction or a decrease in home sales over time.
Investors should monitor the housing affordability index and related economic indicators to gauge the potential impact on consumer spending patterns and the performance of companies directly or indirectly tied to the housing market. Additionally, companies that offer alternative housing solutions or financial services that cater to homebuyers facing affordability challenges may present growth opportunities in this environment.
The income needed to comfortably afford a home is up
- Those shopping for homes today need to make more than
a year to comfortably afford a home.$106,000 - A mortgage payment on a typical
U.S. home has nearly doubled since 2020. Pittsburgh ,Memphis andCleveland are the most affordable markets. Households inCalifornia need to make the most money to afford a home.
In 2020, a household earning
Now, the roughly
"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
For a household making the median income, it would take almost 8.5 years before they would have enough saved to put
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
Metro areas where a buyer could comfortably afford a typical home with the lowest income are
There are seven markets among the major metros where a household's income must be
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 | Size | Income Needed | Change in | Zillow Home | Monthly | Years to |
27 | 5.3 | |||||
43 | 6.9 | |||||
34 | 6.0 | |||||
46 | 7.0 | |||||
50 | 6.7 | |||||
41 | 6.3 | |||||
14 | 6.1 | |||||
49 | 6.5 | |||||
21 | 5.9 | |||||
45 | 6.8 | |||||
33 | 6.6 | |||||
28 | 6.8 | |||||
31 | 7.2 | |||||
5 | 7.5 | |||||
24 | 7.5 | |||||
32 | 7.3 | |||||
40 | 8.5 | |||||
37 | 8.2 | |||||
3 | 6.7 | |||||
44 | 7.9 | |||||
0 | 8.4 | |||||
7 | 7.5 | |||||
39 | 8.2 | |||||
23 | 9.2 | |||||
48 | 7.3 | |||||
16 | 7.3 | |||||
20 | 7.6 | |||||
9 | 8.0 | |||||
18 | 9.8 | |||||
30 | 10.6 | |||||
4 | 8.3 | |||||
22 | 9.9 | |||||
36 | 10.1 | |||||
42 | 8.7 | |||||
11 | 9.9 | |||||
38 | 10.1 | |||||
29 | 8.8 | |||||
8 | 12.3 | |||||
47 | 10.6 | |||||
25 | 11.0 | |||||
6 | 8.2 | |||||
26 | 11.6 | |||||
19 | 10.7 | |||||
13 | 12.6 | |||||
10 | 11.6 | |||||
1 | 12.9 | |||||
15 | 12.2 | |||||
17 | 16.9 | |||||
2 | 19.4 | |||||
12 | 16.0 | |||||
35 | 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
Zillow Group's affiliates, subsidiaries and brands include Zillow®, Zillow Premier Agent®, Zillow Home Loans℠, Trulia®, Out East®, StreetEasy®, HotPads®, ShowingTime+℠, Spruce® and Follow Up Boss®.
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
3 Smoothed and seasonally adjusted ZHVI.
4 Monthly mortgage payment includes principal and interest as well as estimated taxes and insurance for a
View original content to download multimedia:https://www.prnewswire.com/news-releases/home-buyers-need-to-earn-47-000-more-than-in-2020--302075599.html
SOURCE Zillow
FAQ
How much income do home shoppers need to comfortably afford a home according to Zillow's analysis?
What percentage increase has there been in the income required to afford a home since 2020?
Which markets are the most affordable for homebuyers according to the analysis?
Which households face the highest income requirements for affording a home?
What was the median income increase since 2020 according to the analysis?
What was the income threshold for comfortably affording a home in 2020?