Salary of $115,627 needed in order to qualify for a mortgage on a typical American home

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According to a new report by Redfin, a homebuyer must now earn an average salary of $115,627 in order to qualify for a mortgage on a typical American home—a number that is up 15% (or $15,285) year-over-year and up 50% from before the pandemic.

This represents the highest annual income necessary to afford a home on record.

“In a homebuyer’s ideal world, rising mortgage rates would push demand and home prices down enough to make up for high interest payments. But that’s not what’s happening now: Although new listings are ticking up slightly, inventory is still near record lows as homeowners hang onto their low mortgage rates—and that’s propping up prices,” said Redfin Economics Research Lead Chen Zhao. “Buyers—particularly first-timers who are committed to getting into a home now—should think outside the box. Consider a condo or townhouse, which are less expensive than a single-family home, and/or consider moving to a more affordable part of the country, or a more affordable suburb.”

Housing costs are now at their highest levels ever due to two factors: mortgage rates and home prices. The typical U.S. home sold for about $420,000 in August, up 3% year over year and just about $12,000 shy of the all-time high hit in mid-2022 while mortgage rates hovered around the 7.5% mark.

The typical U.S. homebuyer’s monthly mortgage payment is $2,866, an all-time high. This number is up 20% from the $2,395 recorded at the same time last year. In August 2020, for instance, the typical monthly payment was $1,581, based on that month’s average mortgage rate of 2.94% and median home price of $329,000. At that time, a homebuyer would have needed to earn $75,000 per year to afford the typical home.

The bad news is that the average American homebuyer makes $40,000 less than the income needed to buy a median-priced home—the median household income in 2022 was $75,000. While hourly wages have risen in 2023, they have not increased enough, and fast enough, to afford a home.

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