Income Needed to Buy a Typical Home Has Skyrocketed 80% in Just Four Years

Let’s be real: if you’ve thought about buying a house anytime since 2020, you’ve probably checked your bank account and wondered if someone’s playing a cruel joke. Spoiler alert—they’re not. The income you need to snag a typical home? It’s shot up by a jaw-dropping 80% over just four years. Between today’s eye-watering home prices and interest rates that seem stuck in the clouds, it’s no wonder more people feel like they’re chasing the housing market equivalent of a unicorn.

Home Shopping: The New Olympic Sport?

Last month, Zillow crunched the numbers and found that the average hopeful homebuyer needs to earn a whopping $106,500 a year just to afford the monthly mortgage payments for the typical American home. Want to know what you needed back in January 2020? Just $59,000 a year. Ah, 2020—the year of Tiger King, sourdough starters, and, apparently, affordable homeownership.

Back then, the median U.S. household income was about $66,000—more than enough to handle the mortgage without breaking a sweat (or breaking into your emergency snack stash). Fast-forward to now, and incomes have climbed a bit—median’s up to $81,000, according to Zillow. But honestly, that 23% jump barely makes a dent in the nearly $47,000 chasm that’s opened up between income and affordability. It’s like running on a treadmill that suddenly cranked up the speed to 11.

How Much Can You *Actually* Afford?

Now, in case you still have dreams of homebuying, here’s how Zillow runs the numbers. They use the golden rule of personal finance: keep your monthly housing expenses (including mortgage, property taxes, homeowners insurance, and a little extra for when things inevitably go bump in the night) under 30% of your gross income. Easy in theory—much trickier in today’s reality.

Why Home Affordability Has Gone Off the Rails

Here’s where things get spicy. With just a 10% down payment, the typical mortgage payment in January leaped to $2,188 a month—that’s nearly double (yup, 96.4% higher) what you’d shell out four years ago. What’s eating our wallets? It’s a one-two punch: home prices exploded after the pandemic (up a bathwater-spilling 42.4% since 2020), and 30-year mortgage rates have nearly doubled, floating around 6.9% instead of the almost quaint 3.5% we saw pre-pandemic.

So, what’s a buyer to do? Turns out, people are getting mighty creative—think renting out a bedroom, moving somewhere you’ve never heard of, or even calling your best friend and saying, “Hey, want to go halfsies on a house?” Zillow’s noticed more folks cobuying, just so everyone has a shot. Teamwork makes the…mortgage work?

And the fun’s not necessarily over. According to Fannie Mae, home prices might rise another 3.8% in 2024—up from their earlier (more optimistic?) guess of just 2.4%. As inventory lags, prices hold steady, and—let’s be honest—hopeful buyers get a bit grayer waiting. Terry Loebs, founder of Pulsenomics, put it bluntly: don’t expect affordability issues to vanish in a puff of smoke anytime soon.

But hey, let’s end with a little optimism. Fannie Mae’s crystal ball predicts mortgage rates could dip to 6% by year’s end. Is that the lifeline buyers have been waiting for? Only time, Zillow, and another round of Fed meetings will tell.

More Resources for Your Homebuying Adventure

Dreaming of turning those open house tours into a real estate reality? A little research goes a long way, so check out the Best Mortgage Lenders of February 2024. Or perhaps you’re waiting for some good news on the housing front—see how help could be coming, straight from HUD. And if you’re glued to those pesky rates, here’s the scoop on that “magic” rate that might finally tip the scales in your favor.