Housing affordability remains a concern for would-be homebuyers as the income needed to afford a typical U.S. home remains near historic highs and well above what most American households earn, though there are signs of improvement from a year ago.
Home prices surged in 2022 and 2023 amid strong demand coming out of the pandemic, while mortgage rates also doubled due to interest rates rising to counteract the surge in inflation.
A new report by Redfin found that the income needed to afford the typical home on the market is $109,796 as of June – a decrease of 0.5% from the all-time high of $110,382 that was reached last year.
A year ago, the typical American household's income was $26,125 below what was needed to afford a median-priced home at the time, while two years ago the gap was even larger at $28,834. Redfin attributed the narrowing gap to income growth outpacing the growth in housing costs in the last few years.
While the income needed to afford a home has been declining since October 2025, those decreases have been relatively small and the income needed to afford a home is still $22,197 above the typical household income of $87,599.
A TALE OF TWO HOUSING MARKETS: LUXURY DEMAND SURGES AS AFFORDABILITY SQUEEZES STARTER-HOME BUYERS
Compared with last year, the median home sale price was up 2.2% in June, with mortgage rates down slightly into the mid-6% range, while the median household income was up 4% from a year ago.
"The earnings needed to buy a house have stabilized after several years of deterioration, but that doesn't mean homes are affordable to the average American," said Redfin senior economist Yingqi Xu.
"There's still a double-digit gap between what the typical household earns and what they need to comfortably buy a home, leaving many prospective first-time buyers stalled on the sidelines. But even if the market isn't becoming much more affordable, it is becoming a bit more manageable for house hunters," Xu explained.
CASH-STRAPPED HOAS RAMP UP FORECLOSURES AGAINST DELINQUENT HOMEOWNERS: REPORT
The share of affordable listings on the housing market – which Redfin defines as a buyer's mortgage not consuming more than 30% of their income on their monthly housing payment – rose from 31% last year to 34% in June.
However, the report notes there are still far fewer affordable home listings than there used to be, as prior to the 2022 surge in mortgage rates, over half of U.S. home listings were affordable to the typical American nearly every month in records dating back through 2013.
Redfin found affordability improving in 24 of the 46 metro areas included in its analysis, with Seattle homebuyers seeing the biggest decline as the income needed to afford the median priced home in the city declined 7.4% to $221,831.
THESE AMERICAN CITIES ARE TRENDING TOWARD A BUYER'S MARKET
Other West Coast metros rounded out the top three in terms of largest improvements, with San Jose seeing the second-largest decline of 6.5% to $423,840 in income, and Portland in third with a 4.5% decline to $153,844 when compared with a year ago.
However, that doesn't mean the median home is more affordable to typical residents in the area, as in San Jose the median income is still at $176,401 – about $250,000 below what's needed to afford the typical home in that area.
The report found just three metro areas in which the typical household earns more than what's required to afford the median-priced home – St. Louis, Indianapolis and Pittsburgh.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
