Record-High Income Needed to Buy a Typical US Home in 2023
In 2023, potential homebuyers face a challenging market, needing an annual income of at least $114,627 to afford a median-priced home in the U.S. This figure sets a new record, being the highest income ever required for home buying.
This income requirement is significantly higher than the typical median household income, which was approximately $75,000 in 2022, as reported by real estate brokerage Redfin.
The income necessary to purchase a home has surged by 15% from the previous year and has increased by over 50% since the onset of the COVID-19 pandemic.
Chen Zhao, the economics research lead at Redfin, commented that ideally, rising mortgage rates should decrease demand, leading to a drop in home prices. However, the current scenario is different. Despite a slight increase in new listings, the inventory remains critically low due to homeowners retaining their low mortgage rates, thereby keeping prices elevated.
Recent data reveals that over 91% of U.S. homeowners with mortgages have rates below 6%. In contrast, the rate for a 30-year fixed mortgage has recently risen to 7.63%, the highest in more than twenty years. This is a significant jump from the 3.22% rate observed in January 2022.
While the average U.S. hourly wage has seen a growth of around 5% in the past year, it hasn't matched the pace of the income needed to buy a home.
For those looking to purchase, Zhao suggests considering condos or townhouses as they tend to be more affordable than single-family homes. Alternatively, relocating to a more budget-friendly suburb could also ease financial strains.