Discover the income required to buy an average home in the US—80% of Americans cannot afford it

For 80% of Americans today, the great “American dream” is nearly dead, as per a report by ABC News. With skyrocketing real estate prices, low wages, and a stark shortage of homes, people looking to buy properties are in a kind of Catch-22 situation. While buying a house in America can help them build wealth, to buy a house they already need a considerable wealth. As a result, people are no longer enjoying their pretty penny. In August 2024, Statista reported that a majority of Americans can no longer afford an average home. According to research by Zillow, a digital real estate company, Americans must earn roughly $106,500 annually to comfortably afford a typical home.

The grave situation that house hunters are currently in, was worsened during the period of pandemic when people experienced historically low mortgage rates coupled with a low housing supply. Wealth Vieu reports that a median-priced home comes at $417,600 with a household income of $99,589, a figure that has significantly increased over the past few years.

Speaking to Fortune, Ali Wolf, housing market research firm Zonda’s chief economist, said that they’re observing a steep rise in the population of renters than those of homeowners, plus the share of new home projects under $300,000 was declining all across the country. “We’re creating, inadvertently, a renter society not because of choice but because of force,” Wolf said, adding that, renting is considerably cheaper than buying. According to Yahoo Finance, GOBankingRates found that the minimum salary needed to comfortably afford a home ranges between an average of $50,000 to $200,000. Redfin reported that a person needs to make almost $76,000 a year to buy a starter home.

But what makes a house affordable? According to CBS News, a house is considered affordable if a buyer spends no more than 30% of their pre-tax income on housing costs, including mortgage payments. This threshold has critically risen by 80% in the previous years. Yet, wages have not grown as fast as the mortgage rates have. Today, not even the high-wage earners can afford to buy a home in large metro cities in America.

"Housing costs have soared over the past four years as drastic hikes in home prices, mortgage rates, and rent growth far outpaced wage gains," Orphe Divounguy, a senior economist at Zillow, told CBS News. He added that high housing costs are propelling Americans to buy properties in more affordable parts of the country. The solution to this, he said, is to create more housing supply. “The key to improving affordability long term is to build more homes.”

Some of the affordable cities in the U.S. include Pittsburgh, where a person can buy a house at an income starting with $58,200. Birmingham, Alabama, Cleveland, Memphis, Tennessee, and New Orleans are also relatively affordable for prospective home hunters. The most expensive city in America is San Jose, California. According to CNBC, a household needs to earn $463,887 to afford a median-priced home in San Jose, California, making it the most expensive of the 50 largest U.S. cities. Apart from California, other expensive cities include Salt Lake City, Austin, Sacramento, Portland, Riverside, Washington, Miami, Denver, Boston, New York City, Seattle, Los Angeles, San Diego, and San Francisco.