US Households Must Earn Nearly $108,000 to Afford a Median-Priced Home: Report

A "For Sale" sign in front of a home in Arlington, Va., on Aug. 22, 2023. Andrew Caballero-Reynolds/AFP via Getty Images

Housing affordability has dropped considerably in major American metros, according to the latest data published by Oxford Economics in a Nov. 11 report, which adds that only about a third of households earn enough income to afford a property.

The report analyzed the income needed by households from 173 U.S. metros to afford a median-priced single-family home and pay both property taxes and home insurance costs.

“The average US household needed to earn $107,700 annually to afford the median housing costs in Q3 2024, nearly double the $56,800 equivalent annual household income needed in Q3 2019,” Oxford said in the report. Only 36 percent of households earned the income needed in Q3 2024 to afford a home, compared to 59 percent in 2019.

Four of the top five least affordable metros were in California. The least affordable metro was San Jose, California, with prospective buyers needing almost double the amount of income to afford a median-priced home compared to five years ago. San Jose’s median house price was $1.89 million in Q3. It was followed by Honolulu, Los Angeles, San Diego, and San Francisco in the top five.

The state which experienced the greatest decline in affordability was Florida. Among the top 20 metros that saw the biggest drop in households that can afford housing, seven were in the state.

While prices rose by 49 percent between 2019 and 2024, affordability was more negatively impacted by the jump in mortgage rates from 3.7 to 6.5 percent as well as higher property taxes and insurance costs, the report said.

Oxford pointed out that affordability could improve as mortgage rates are expected to decline. This requires that home prices do not rise at a rate greater than the savings in interest costs.

“While we forecast house prices to increase over the near term, we expect rates of growth will taper off somewhat, which, combined with our forecast for declines in mortgage rates, yields improving affordability across the US over the rest of 2024,” Oxford said. “However, over the medium term, we expect house price growth to override the decline in mortgage rates such that the income required to afford housing costs will start to rise moderately again starting in Q1 2025.”

A recent report from the National Association of Realtors (NAR) found that almost 90 percent of 226 metro markets tracked by the group saw home prices increase in the third quarter of this year.

NAR Chief Economist Lawrence Yun said that price appreciation benefited homeowners who have accumulated $147,000 in housing wealth over the past five years. While housing affordability remains a challenge, the worst “appears to be over,” he said.

“Rising wages are outpacing home price increases. Despite some short-term swings, mortgage rates are set to stabilize below last year’s levels. More inventory is reaching the market and providing additional options for consumers.”

With President-elect Donald Trump set to enter the White House in January, the new administration’s policies will be a significant factor in dealing with the housing affordability crisis facing America.

During the campaign, the Republican candidate promised to take several measures to boost housing supplies. Republicans have said they plan to lower mortgage rates by bringing down inflation.

Republicans are aiming to “open limited portions of federal lands to allow for new home construction, promote homeownership through tax incentives and support for first-time buyers, and cut unnecessary regulations that raise housing costs,” according to the GOP platform.

Carl Harris, chairman of the National Association of Home Builders, said his organization was looking forward to working with the Trump administration and Congress to enact a “pro-housing legislative and regulatory agenda” that will raise supply and tackle the affordability issue.

Real estate listings resource Realtor said it is apprehensive about any major impact from Trump on the market. The housing crisis facing America is over a decade in the making, the company said in a Nov. 6 report.

Following the Great Recession of 2007–2009, construction activity plunged and has not recovered since, which has resulted in the ongoing undersupply in the market, Realtor noted. “Quick and easy fixes are unlikely to emerge.”

During a recent forum in Boston, Yun said that the mortgage rate during Trump’s first term was four percent. He does not expect rates to go back to this level.

“It’s more likely that we’ll go back to 6 percent. That will be the new normal, bouncing around 5.5 percent to 6.5 percent,” he said. “There will be less mortgage money available because the government is borrowing so much money. However, if the Trump administration can lay out a credible plan to reduce the budget deficit, then mortgage rates can move downward.”