BIDENOMICS: Americans need a six-figure salary to afford a median-priced home: study

Apr 2, 2024 | Political News

The average US home now requires a six-figure salary to afford, marking a significant increase compared to pre-pandemic levels, according to a study by Bankrate.

The study reveals that the average home buyer needs to earn over $110,000 annually to afford the median-priced home in 22 states. This represents a substantial jump from January 2020, when the average home buyer only needed to make approximately $75,000—a 46% increase.

During the same period, median home prices have surged from $290,000 to $412,000, marking a 42% increase. 

Jeff Ostrowski, Bankrate housing market analyst, identifies affordability as the primary challenge, attributing it to record-high home values. He emphasizes the difficulty of meeting down payment requirements and monthly payments, particularly as home prices continue to soar.

“Home values are near record highs, and if you want a house, you have little choice but to pay a high price,” said Ostrowski.

Liberal-run states such as California, Massachusetts, Hawaii, and Washington require the highest income, with homeowners needing to earn between $156,000 and $197,000. Conversely, states like Mississippi, Ohio, Arkansas, Indiana, and Kentucky require significantly lower incomes, ranging from $63,000 to $65,000.

One key factor contributing to the higher income threshold is the steep increase in mortgage rates, which have risen by over 3% in just the past four years. As a result, prospective homebuyers face greater financial barriers to homeownership, particularly in regions with already high housing costs.

Another factor is the current shortage of houses, with many homeowners who bought houses prior to the pandemic refusing to sell to avoid the rising mortgage rates. 

This study comes at a time when a majority of Americans say they are worse off financially than before President Biden took office. According to a poll by Fox News, 52% of Americans say they are financially worse now than they were four years ago, with only 22% saying they are better off.

“Over the past few years, the supply of homes has been constrained by a number of factors, including muted homebuilding and the lock-in effect,” said Ostrowski. “But demand for homes has been growing, and there are more buyers than sellers.”