New reporting on Redfin’s latest affordability data shows that the income needed to buy a typical US home remains close to a record high. A household needed to earn $109,796 a year to afford the typical home, just 0.5% below the record $110,382 required a year earlier, according to the new data.
The analysis is based on June housing data and assumes buyers spend no more than 30% of their income on housing. Estimated median household income was $87,599, leaving a gap of about $22,200 between typical earnings and the income required under the model.
What the $109,796 figure actually measures
The affordability calculation incorporates home prices, mortgage rates and property taxes and assumes a 15% down payment. Under those assumptions, the typical household would need to spend about 38% of its income to purchase the median-priced home. The share of listings considered affordable to a median-income household improved to 34.2% in June, up from 30.5% a year earlier.
More inventory has not eliminated the affordability mismatch. Separate housing research found that lower- and middle-income buyers still face shortages of listings within their price ranges even as overall inventory improves. Local home prices, property taxes and insurance costs can put a buyer’s actual affordability well above or below the national estimate.
Use a lender-confirmed budget
The nearly $110,000 figure measures national affordability. It does not determine whether an individual buyer will qualify for a mortgage or how much that buyer should spend.
Lenders evaluate income, existing debt and the proposed housing payment, among other factors. The Consumer Financial Protection Bureau defines debt-to-income ratio as monthly debt payments divided by gross monthly income. DTI limits vary by lender and loan product.
Agents should set the search range from the lender-confirmed payment, not from the national income figure. Interest rates, down payment size, existing debt, property taxes, insurance and HOA costs can all change the price range a buyer can realistically carry. Before restarting a paused search, have the lender update the buyer’s payment range using current finances and available loan terms.
Don’t use affordability data to price listings
National affordability figures should not determine a seller’s asking price. Agents should use comparable sales and current local market conditions such as inventory, days on market, price cuts and sale-to-list-price ratios to support pricing recommendations.
Verify the payment before changing the search
Before a buyer appointment, confirm the lender-approved payment range, current mortgage rate, down payment and property-specific costs. Those figures provide a more reliable basis for adjusting a search than the national income benchmark.
The nearly $110,000 threshold shows that affordability remains tight despite modest improvement. Agents adjusting a buyer’s search should work from the lender’s current payment numbers rather than the national benchmark.