Affording a home in today’s market has become much harder for Americans.
A new report from Oxford Economics shows that U.S. households now need an annual income of at least $107,700 to buy a new single-family home and cover property taxes and insurance—nearly double the income needed in 2019.
Five years ago, a household income of $56,800 was sufficient for homeownership, but today only about 36% of U.S. households meet the new financial threshold, down from 59% in 2019.
The report underlines just how dramatically home affordability has shifted, spurred by the pandemic and rising mortgage rates.
As COVID-19 upended the economy, a shift in housing preferences drove many Americans to relocate, often seeking larger spaces to accommodate remote work.
With demand surging and supply limited, competition intensified, pushing home prices to unprecedented levels in many cities.
Location, however, continues to play a crucial role in affordability.
San Jose, California, ranks as the least affordable metro area, where a median-priced home costs $1.89 million, requiring a household income of $461,000.
Other cities like San Francisco, Los Angeles, and San Diego join San Jose in California’s housing crunch, with similarly high costs of living.
By contrast, Midwest cities offer more accessible housing. In cities like Cleveland, Detroit, Louisville, and St. Louis, the income needed to afford housing ranges from $64,600 to $75,300, making these areas far more affordable than their coastal counterparts.
Florida, Arizona, and South Carolina, however, have seen notable declines in affordability, especially in regions with a large influx of retirees over recent years.
Rising mortgage rates are a significant factor fueling the affordability crisis. Rates nearly doubled from 3.7% in Q3 2019 to a peak of 7.3% in Q4 2023, as the Federal Reserve increased interest rates to manage inflation.
Although mortgage rates have slightly eased to around 6.79% on a standard 30-year fixed mortgage, they remain well above pre-pandemic levels, keeping monthly payments high for potential homeowners.
Oxford Economics determined housing affordability by calculating whether monthly housing expenses exceed 28% of household income.
While some cities remain within reach for buyers, today’s housing landscape illustrates a growing divide across regions, leaving many Americans questioning if homeownership remains achievable.