Home buyers need to make $47,000 more than in 2020 to afford a home

FILE Modern row homes in a suburban neighborhood are seen from an elevated view, (Photo by Visions of America/Joseph Sohm/Universal Images Group via Getty Images)

Prospective home buyers in the market for a house will have to earn more money to purchase one.

Zillow said in a recent report that home buyers would need to make $106,500 ($47,000 more today) to comfortably afford a home, which is well above what a typical U.S. household earns each year, estimated at $81,000.  

In 2020, a household making $59,000 per year could comfortably afford the monthly mortgage on a home, spending no more than 30% of its income with a 10% down payment. According to Zillow, this was below the U.S. median income of roughly $66,000, meaning more than half of households have the money to afford a home.

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With housing costs skyrocketing over the past four years, a monthly mortgage payment on a U.S. home now has risen to $2,188.  Additionally, home values have increased 42.4% over the past four years, with homes now worth $343,000. 

Zillow listed cities where the household income needed to purchase a home is the highest and lowest.

Cities where homes are more affordable based on income

  1. Pittsburgh-($58,232)
  2. Memphis-($69,976)
  3. Cleveland-($70,810)
  4. New Orleans-($74,048)
  5. Birmingham-($74,338)

Cities where homes are least affordable based on income

  1. San Jose ($454,296)
  2. San Francisco ($339,864)
  3. Los Angeles ($279,250)
  4. San Diego ($273,613)
  5. Seattle ($213,984)
  6. New York City metro area ($213,615)
  7. Boston ($205,253)

Zillow notes that a household making the median income in today’s housing market would have to save up for nearly 8.5 years to put 10% down on a typical home, a year longer, compared to 2020.

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And to help cover the cost of a down payment, half of first-time buyers tell Zillow that a portion of the money came from a gift or loan from relatives or friends. 

Some consumers are also teaming up with a friend or relative to buy a home, with 21% of buyers in 2023 doing that, and potential buyers moving to low-cost cities to find affordable housing. 

This story was reported from Washington, D.C.