Home prices are up 42% since 2020, but because both rates and borrowing costs have skyrocketed, you need to earn 80% more to comfortably afford a home in today’s market.
“Incomes needed to purchase a home are just much, much higher than the typical household income,” said Orphe Divounguy, chief economist at Zillow, which conducted the analysis. “The increase in cost is pricing out many families that would like to get on the housing ladder.”In fact, today’s typical buyer would be facing a monthly mortgage payment that was 96% higher compared to 2020 levels, Zillow found. That’s an average payment of $2,200 a month, with a 10% down payment.
“Traditional measures of affordability are at 30-year lows, and that will impact the age of first-time homebuyers,” Doug Duncan, chief economist at Fannie Mae, told Yahoo Finance. “It means they will have to marshal more resources before they can enter the purchase market, which typically takes them longer.”
By contrast, there are seven markets among major metros where would-be buyers need to earn $200,000 or more to afford a typical home. The top four were all in California — with San Jose taking the lead at , followed by San Francisco , Los Angeles , and San Diego .“In this environment, buyers should really get their finances in order first,” Divounguy said. “You’ll want to start the search process early, get your credit right, and that can save you thousands over the course of the loan.