Want to own a piece of the American Dream? You better make some money — a lot of money.
It now takes an average annual income of $107,000 to afford the monthly mortgage payment on a typical home in the U.S., according to Redfin. That’s a whopping 46% rise from a year ago.
Of course, in some places, you won’t need that much cash, and in others, you will need more. But the notion that you now need on average a six-figure income just to buy a home is sobering.
Redfin says two factors have made buying a home much tougher for those with modest incomes:
- Home prices that remain sky-high after years of rising
- Surging mortgage rates that have more than doubled over the past year
According to Redfin:
“After remaining mostly unchanged for several years, the annual household income necessary to afford a monthly mortgage payment began climbing at the beginning of last year due to the pandemic homebuying boom and rapid rise in prices.”
Since February 2020 — just as the pandemic was arriving in the U.S. — an American family buying a median-priced home in the U.S. has seen their monthly payment jump by roughly 70%.
Redfin says the increase in income needed to buy a home is especially pronounced in Florida, which has become a go-to state for those moving out of New York and other places.
For example, in North Port, Florida, you needed an income of $75,659 a year ago to buy a home. Today, that figure has jumped to $131,535, up 73.9%.
Of the 20 cities where income requirements have increased the most, 16 are located in the nation’s Sun Belt. Homes had tended to be more affordable in this region and the weather is milder, both factors that made them popular.
Now that millions of Americans are able to work remotely, they are voting with their feet and leaving higher-tax states for those more affordable alternatives — driving up prices in the process.
Are you planning to buy a home soon? Stop by our Solutions Center and search for a great mortgage rate.