Americans must earn US$114,000 a year to afford a typical home

AMERICANS must earn more than ever to buy a home in the US.

Homebuyers needed a US$114,000 salary to afford a typical home in September – assuming a 7.2 per cent mortgage rate with 20 per cent down on a median priced home of US$412,001 – according to real estate brokerage Redfin.

To comfortably “afford” a home payment, a buyer should spend no more than 30 per cent of their income on housing costs. And Americans have never needed more than current levels in data going back till 2012, when the salary requirement was roughly US$38,000.

Homeownership has long been a key way to build wealth in the US, but first-time buyers are increasingly being shut out of the unaffordable housing market. The median salary in America is US$70,000, according to Federal Reserve data, making it difficult for many to buy properties.

Access to US homeownership first became a six-figure club in 2022, thanks to borrowing costs rising at the fastest clip in decades while home prices remained high. It’s only gotten more expensive with mortgage rates hurdling towards 8 per cent. Existing homeowners are reluctant to move because they are locked in at lower rates, and new buyers are struggling to find properties they can afford, pushing mortgage applications to a multi-decade low.

The average income requirement for a home hit a record of US$115,000 in August before slipping slightly last month. And the situation is much worse in expensive markets. In California’s Bay Area, buyers needed to earn US$400,000 a year for a typical home, priced north of US$1 million in August. New Yorkers needed to earn almost US$200,0000 for a median home listed at US$725,000. And those seeking sunshine and low taxes in Miami needed about US$143,000 in income. BLOOMBERG