Americans need a $110,000 income to afford a home as prices keep outpacing pay

Why buying a home still costs six figures

Buying a typical American home still requires a six-figure income. A recent Redfin analysis found that households needed about $109,796 a year to afford the typical home while keeping monthly housing costs within 30 percent of income.

That figure is slightly lower than last year’s level, but it remains far above what many households earn. The result shows how expensive homeownership remains even as affordability has started improving.

The affordability gap remains wide

The typical U.S. household earns considerably less than the income needed to afford a median-priced home. Recent estimates put median household income around $87,600, leaving a gap of more than $22,000.

That difference helps explain why many Americans can have steady employment and still struggle to qualify for a mortgage. Housing costs have created a financial hurdle that ordinary wage growth has not completely erased.

Home prices are still near records

Affordability remains difficult partly because home prices are still extremely high. The national median existing home price reached about $440,600 in June, according to the National Association of Realtors.

Even when prices stop rising rapidly, buyers are still starting from an unusually expensive level. A small slowdown in price growth therefore does not automatically make homeownership affordable for households whose incomes have not caught up.

Mortgage rates add another burden

Home prices are only part of the affordability equation. Mortgage rates also determine how much a buyer must earn to handle monthly payments.

Thirty-year mortgage rates remain around the mid-6% range, keeping borrowing costs much higher than they were during the pandemic period.

Even modest changes in rates can significantly affect monthly payments when buyers are financing hundreds of thousands of dollars.

Affordability has actually improved

There is a less obvious side to the housing story. Buying a typical home has become somewhat more affordable compared with last year. Redfin found that the income needed to afford a typical home fell from $115,870 to $111,252 in its February analysis.

Later data showed further improvement, with the required income falling to about $109,796 by mid-2026. Rising incomes and slower price growth have helped narrow the gap.

Wages are finally helping buyers

Income growth is giving prospective buyers some relief. Recent housing data shows that wages have been increasing faster than home prices in some periods, helping improve affordability even while prices remain elevated.

That does not mean homes have suddenly become cheap. It means household earnings are slowly catching up with housing costs. For buyers who can qualify for financing, that shift can make the difference between stretching a budget and remaining in the market.

More homes are becoming affordable

The share of listings considered affordable to typical households has also improved. Redfin found that 34.2% of U.S. listings met its affordability standard in June, up from 30.5% a year earlier.

That is progress, but the number remains well below the levels seen several years ago. The improvement shows that the market is moving in the right direction without solving the larger affordability problem.

Little-known fact: A lender may approve a mortgage that looks affordable on paper but leaves too little room for other priorities, including emergency savings, retirement, car repairs, and everyday expenses.

First-time buyers face a different hurdle

People buying their first home often have fewer financial advantages than existing homeowners. They may not have significant home equity to use for a down payment, and they are entering the market without the benefit of a previous property that appreciated.

That makes high prices and mortgage rates especially difficult for younger households. Even when overall affordability improves, saving enough cash to enter the market can remain a major obstacle.

Some cities are much more affordable

The national numbers hide enormous differences between housing markets. Redfin found that affordability improved in 24 of the 46 major metropolitan areas included in its June analysis.

Only St. Louis, Indianapolis, and Pittsburgh had typical household incomes high enough to afford the typical local home. Cleveland remained relatively accessible, but its median household income was slightly below the amount needed to meet Redfin’s affordability standard.

Little-known fact: U.S. News ranks Mississippi as the most affordable state, followed by Arkansas, West Virginia, Oklahoma, Louisiana, Iowa, Alabama, South Dakota, Kentucky, and North Dakota.

California buyers face a tougher reality

Some of the largest affordability problems are concentrated in expensive coastal markets. California cities remain especially difficult for typical earners because home prices are high relative to local incomes.

Even when prices decline, or wage growth improves, buyers may still need substantially higher incomes than households elsewhere. That helps explain why national affordability figures can look better while many families in expensive states continue feeling locked out.

Supply remains part of the problem

Housing affordability cannot be explained by mortgage rates alone. The supply of homes available for buyers also plays an important role. More inventory can give shoppers additional choices and reduce competition for individual properties.

Recent housing data shows supply has improved from pandemic-era lows, but the market still does not have enough reasonably priced homes in many areas where demand remains strong.

Renters are watching the market closely

High home prices do not affect only people who are ready to buy. They also shape the decisions of renters who are hesitant to move into homeownership because buying remains expensive.

Some renters may continue saving for a down payment while waiting for better rates or lower prices. Others may decide that renting is the more practical choice until their income or local housing conditions improve.

Want to stay informed about Seattle’s changing housing market? Check out why Seattle homeowners sell properties as housing costs strain budgets.

The housing gap is slowly narrowing

America’s housing market is showing modest signs of improvement, but the progress is uneven. The income needed to afford a typical home has fallen from its recent peak, while household incomes have grown faster than home prices over the past year.

Still, a household needs roughly $110,000 in annual income to meet a common affordability standard. For millions of Americans, that remains a daunting target and a reminder of how difficult buying a home can be.

Curious why Bay Area renters are still struggling with housing costs? Check out why housing costs continue to challenge renters across the Bay Area.

What do you think would make homeownership more affordable for Americans? Share your thoughts in the comments, and leave a like if buying a home still feels out of reach.

This slideshow was made with AI assistance and human editing.

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