The American dream of homeownership is becoming increasingly out of reach for many as home prices soar to new heights. According to a recent Zillow analysis, the median income has only risen 23% over the past four years, while home prices have surged a staggering 42% since 2020. This means that in today's market, prospective homebuyers need to earn a whopping 80% more to comfortably afford a home compared to just two years ago.
In 2020, a household earning $59,000 a year could afford a typical home priced at around $240,815. Fast forward to today, and that same household would need to earn $106,000 annually to buy a median-priced home at $342,941. This significant increase in income requirements has priced many families out of the housing market, with affordability becoming a major concern in most major metros.
The rise in both home prices and mortgage rates has led to a nearly doubling of monthly mortgage payments on a typical US home over the past four years. With mortgage rates hovering around 7% and home prices continuing to climb, the affordability crunch shows no signs of easing any time soon.
To combat these challenges, some buyers are turning to creative solutions like co-buying with friends or family, or utilizing house hacking techniques to save money. However, for many, the dream of homeownership remains just that—a dream.
In this challenging environment, prospective buyers are advised to get their finances in order, start the search process early, and work on improving their credit to maximize their chances of affording a home in today's competitive market. As the housing market continues to evolve, staying informed and proactive is key to navigating the complexities of homeownership in the current economic landscape.