• A median-income family needs a $17,670 raise to afford the mortgage payments on a typical U.S. home, even with $73,257 saved for a 20% down payment.
• In four California markets, median earners would need a six-figure raise to afford the typical home. 
• Affordability challenges for buyers have increased interest in single-family rentals. 

Five years ago, a median-income household could afford a typical U.S. home. Today, they’re more than $17,000 short, even if they have about $73,000 saved for a down payment.

The housing market is friendlier for buyers this spring than in any spring since before the pandemic. Inventory is up, home values are softening, and a record number of sellers are cutting their list price for this time of year. However, incredible home value growth and higher mortgage rates in recent years have reset the financial bar for homeownership. These affordability pressures have helped chill buyer demand, while amping up interest in single-family rentals.  

To comfortably afford a typical U.S. home worth $367,969, a buyer today needs to make nearly $100,000 a year, which means a household making the median income would need a $17,670 raise. That’s assuming they have $73,594 saved for a 20% down payment. If that same household only has enough savings for a 10% down payment, they’d need a raise of $36,287.

Median earners would need raises of at least $100,000 in four major metro areas, all of which are in California. Even with a whopping $330,000 saved for a 20% down payment, a median-income household in San Jose would need a raise of more than $250,000 to afford the typical home. Median-income households would also need six-figure raises in San Francisco ($165,566), Los Angeles ($149,375) and San Diego ($128,954).

There are 11 major markets where the median income is enough to afford the typical mortgage payment, down from 39 such markets five years ago. These are generally midsize markets in the Midwest and Northeast. Median earners in Cleveland have the most room to spare, making $11,588 more than what’s needed to afford the typical home, followed by Pittsburgh ($11,244), St. Louis ($4,897) and Cincinnati ($4,396). 

Successful buyers are looking under every rock to come up with a down payment big enough to allow them to afford the monthly payments. More than half of buyers tap at least two sources, most commonly savings (72% of buyers), the sale of a previous home (46%) and a gift or loan from family or friends (38%).

As affordability headwinds have stiffened for would-be first-time buyers, the median age of renters is rising and demand has increased for single-family rentals. These homes now rent for 41% more than five years ago, compared to 30% growth for multifamily units.

Methodology

Home values come from the Zillow Home Value Index. To be considered affordable, a monthly mortgage payment must account for no more than 30% of household income. 

Median household income is taken from the American Community Survey (ACS) through 2023. Present-day estimates combine changes in the Employment Cost Index provided by the Bureau of Labor Statistics to forecast current median household income.