Buying a home in America feels further and further out of reach. Home prices and mortgage rates have been elevated ever since the pandemic housing boom, and wages haven’t kept up with inflation.
Considering these variables, more than 75% of homes on the market are unaffordable to the typical household, according to a new Bankrate analysis released Monday.
“When only a sliver of the market is affordable to the typical household, homeownership starts to feel less like a milestone and more like a luxury,” said Bankrate data analyst Alex Gailey. “It’s no surprise that one in six aspiring homeowners have walked away in the last five years.” Another Bankrate analysis from September shows one in six aspiring homeowners had completely given up on finding a home to buy.
Meanwhile, there’s a $30,000 gap between what the typical U.S. household makes and what it needs to afford a median price home, according to the latest Bankrate analysis. The typical U.S. household earns about $80,000 per year, according to U.S. Census Bureau data, but hopeful homebuyers need a $113,000 salary to afford a median-priced home. A median-priced home in the U.S. is $447,035, according to an August Redfin report.
But in some of the most desirable U.S. metros, buyers need far more to afford a median priced home. The following are a list of the 10 cities requiring the highest salaries in the U.S., per Redfin:
- San Jose, Calif.: $413,100
- San Francisco: $393,443
- Anaheim, Calif.: $302,587
- Oakland, Calif.: $244,073
- Los Angeles: $234,619
- San Diego: $227,612
- Seattle: $219,498
- New York City: $213,245
- Nassau County, N.Y.: $207,386
- Boston: $204,465
Bankrate’s analysis also showed Los Angeles, San Diego, and Boston were among the cities where affordable homes are the hardest to find, also including New Orleans and Miami.
“For many families, the challenge isn’t just high home prices and elevated mortgage rates,” Gailey said. “It’s that housing shortages across the country have left them with far fewer homes they can afford.”
However, there are a few U.S. cities where affordable homes are at least a little easier to find. That includes Pittsburgh, St. Louis, Baltimore, Detroit, and Birmingham, Ala.
Realtor.com recently crowned Pittsburgh as the most affordable city in America, where the median home price is less than $250,000. “In a housing landscape where affordability has eroded nationwide, Pittsburgh remains a rare bright spot where buying a home is still within reach for most households,” Realtor.com senior economic research analyst Hannah Jones said in a statement.
The Washington Post also recently profiled Pittsburgh as having one of the most affordable housing markets in the U.S., giving the example of grocery store deli counter manager Liam Weaver, 30, and professional ballet dancer Issac Ray, 26, who bought their first home in Pittsburgh for just $163,000. Although they spent about $10,000 on renovations, the cost of the house was only about one-third the cost of a median-priced home in the U.S.
But Pittsburgh, among other semi-affordable cities, is most certainly the outlier in today’s housing market.
“Affordability looks very different depending on where you live,” Gailey said. “Some large cities still give median-income households a path to buying a home, while others have become increasingly difficult to break into.”
And some Americans—particularly younger generations—have been desperate to break into the housing market, grasping for long-term financial stability and the same security their parents and grandparents earned by buying a home. Some millennials are carpooling for homes, teaming up with friends and family to buy a house. Some Gen Zers are taking on multiple side hustles just to save up enough to afford a down payment.
Realtors working with these clients have also encouraged them to accept the idea of “trading up,” or essentially settling for a cheaper house and one that’s certainly not a dream home. Paul Beaudreau with KW Realty in Burlingame, Calif., previously told Fortune he teaches buyers that purchasing a more affordable house first, building equity, then selling it, can be an easier way to save up for a down payment on a dream home down the road.
“While I don’t try to tell my clients to give up on that dream home, I’m trying to explain to them what the path is to get to that dream home,” he said. “Your first home is never your last home, and quite frankly is never your dream home.”
