Homebuyers need to earn 80% more than they did pre-COVID to comfortably afford a house in this market, Zillow says
- Homebuyers need to earn 80% more than they did pre-COVID to comfortably afford a house in the current market, Zillow found.
- Housing costs have soared, and wages haven't kept up, data in a new report showed.
Home prices have soared, and household earnings haven't been able to keep pace.
According to a new report from Zillow, homebuyers today need to make north of $106,000 to comfortably afford a house in this market. That's $47,000 — or 80% — more than they needed in January 2020, pre-COVID.
"The math has changed for hopeful buyers, who are more often partnering with friends and family or 'house hacking' their way to homeownership," the report said.
Today, home prices are 42.4% more expensive than they were prior to the pandemic, with a typical home costing about $343,000. And at the same time, median incomes have risen only 23% to $81,000.
But it's more than just home prices. Monthly mortgage payments have nearly doubled. From January 2020, they are up 96.4% to $2,188 a month (assuming a 10% down payment).
Back then, mortgage rates on a 30-year loan were around 3.5%. Today, they're at 6.9%, per Freddie Mac.
According to the report, it would now take a household earning a median income 8.5 years — a year longer 2020 estimates — to save up enough to put 10% down on a typical US home.
"It's no wonder, then, that half of first-time buyers say at least part of their down payment came from a gift or loan from family or friends," Zillow said.
There is also a geographic dispersion at play here. Some housing markets in the US have become wildly more unaffordable than others. For example, there are seven housing markets, including cities like San Francisco, San Jose, Seattle, and New York, where a household's income must be $200,000 or more to comfortably afford a typical home.
On the other end of that spectrum are cities where the affordability bar is much lower, like Cleveland ($70,810) and Pittsburgh ($58,232).