You Now Need To Earn At Least $107,281 Annually To Own A Home
If adhering to the 30% rule, the typical U.S. homebuyer must earn at least $107,281 per year to afford the $2,682 monthly mortgage payment on the typical U.S. home. That number is up 45.6% from the $73,668 needed a year ago – the result of persistently high housing prices paired with mortgage rates.
Over the same time period, the average hourly wage in the US increased by around 5%, and inflation is also putting pressure on prospective buyers' budgets.
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The annual household income required to afford a monthly mortgage payment had been largely stable for several years, but due to a pandemic homebuying spree and sharp price increases, mortgage payments began to rise at the beginning of 2021.
When mortgage rates rose at their highest rate in history in 2022, hitting 7% by the end of October, the income necessary to purchase a home surged. However, rates registered their largest single-day decline in 41 years last week after new data showed that inflation is slowing.
Home prices also continued to increase for much of the year — increasing a staggering 70% from just before the pandemic in February 2020, to October 2022 — though they’ve now started declining from their peak and year-over-year growth has now slowed to around 3%.
According to Redfin Corp (NASDAQ: RDFN) data, North Port, Florida, where property prices have increased the most year over year, purchasers must make at least $131,535 annually to afford the average monthly mortgage payment of $3,288, increasing 73.9% from $75,659 a year ago.
The Chicagoland region saw the smallest increase, with Lake County homebuyers needing to earn 33.5% more than they did a year ago to make the average mortgage payment.
With a typical home price of $48,435 in the area, Detroit, Michigan, continues to have the most affordable housing market.
To read about the latest developments in the industry, check out Benzinga's real estate home page.
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