Redfin Reports The Typical Household Earns Roughly $30,000 Less Than Needed to Afford the Median-Priced Home

(NASDAQ: RDFN) — The typical U.S. household earns $29,448 less than it needs to afford the median-priced home, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

While that’s a sign of a major housing affordability crisis, it marks an improvement from October, when the typical household earned a record $40,810 less than it needed as mortgage rates hit the highest level in 23 years.

That’s based on a Redfin analysis of the estimated median U.S. household income and median monthly housing payments as of February 2024.

Buyers needed to earn an annual income of $113,520 to afford the median-priced U.S. home in February ($412,778). That’s 35% more than the $84,072 median household income.

In October, when the mismatch between median income and the income needed to afford a home was highest, homebuyers needed to earn $120,500 to afford the typical home. That was a record 51% more than the $79,689 earned by the typical household.

February 2021 was the last month on record when the typical household earned more than it needed to afford the median priced home. Back then, the median household income was $69,021—6% higher than the $65,292 needed to afford the typical home.

“For over a decade, America has been slowly marching toward a housing affordability crisis due to chronic underbuilding, and that crisis was kicked into overdrive when the pandemic homebuying boom fueled a meteoric rise in housing prices,” said Redfin Senior Economist Elijah de la Campa. “Now there’s another culprit squeezing homebuyers: elevated mortgage rates. We’re slowly climbing our way out of an affordability hole, but we have a long way to go. Rates have come down from their peak, and are expected to fall again by the end of the year, which should make homebuying a little more affordable and incentivize buyers to come off the sidelines.”

Home sales fell to the lowest level in roughly three decades last year as elevated mortgage rates pushed homeownership out of reach for many Americans—especially first-time buyers, who haven’t built up equity from the sale of a previous home. Many Americans remain priced out of homeownership because rates remain elevated, and home prices continue climbing (they rose 7% year over year in February) due to a shortage of homes for sale.