Income Threshold for Homeownership Falls to $111,252 as Mortgage Costs Ease

Redfin reports modest improvement in affordability as lower mortgage rates reduce required annual earnings and monthly payments.

By yourNEWS Media Newsroom

The annual income required to afford a typical home in the United States has declined to $111,252, marking a 4 percent drop from a year ago, according to a Feb. 11 report from real estate brokerage Redfin.

In a statement announcing the findings, Redfin said the required income has been trending downward since November, offering relief after nearly five consecutive years of year-over-year increases that followed the pandemic-era housing surge.

“The income needed to buy a home has been declining since November, providing some much-needed relief for U.S. homebuyers. Before that, the income needed to afford a home had been rising on a year-over-year basis nearly every month for five years straight, since the pandemic homebuying boom drove up home-sale prices,” the company said.

The current threshold is down from a peak of $122,000 recorded in June.

“While housing remains historically expensive, the trajectory is finally starting to reverse, with the door to buying a home opening a bit wider rather than closing tighter,” Chen Zhao, Redfin’s head of economics research, said. “But while affordability is improving, Americans are contending with other obstacles on the road to buying a home, like nerves about layoffs and economic uncertainty.”

Redfin attributed the improvement primarily to steady home prices and lower mortgage rates. The median price of a home for sale stands at $426,747, a figure the brokerage described as only slightly higher than last year.

Freddie Mac data show the average rate on a 30-year fixed mortgage was 6.09 percent for the week ending Feb. 12, down from 6.87 percent one year earlier. Rates had remained above 6.5 percent for much of late 2024 before declining below that threshold in September.

Sam Khater, Freddie Mac’s chief economist, said in a Feb. 12 statement that affordability has “measurably improve[d]” due to mortgage rates reaching three-year lows, along with a solid labor market and continued economic growth. He added that these conditions have contributed to increased mortgage purchase application activity compared to last year.

The decline in borrowing costs has reduced the median monthly mortgage payment from $2,800 a year ago to $2,675, according to Redfin.

Affordability has improved in 37 of the 50 most populous U.S. metropolitan areas. Dallas recorded the most significant improvement, followed by Sacramento, California, and Jacksonville, Florida.

Despite recent gains, housing affordability remains a concern for many Americans. A Feb. 2 report from Bright MLS, based on a survey of more than 3,000 respondents, found that over 90 percent view housing affordability as a problem. High mortgage rates and limited personal income were cited as primary factors.

The survey also identified supply constraints, with 43.2 percent of respondents stating that not enough housing is being built at lower price points.

In a Jan. 22 statement, the National Association of Home Builders said it urged Congress to reduce regulatory burdens that it says increase construction costs. NAHB Chairman Buddy Hughes testified before Congress that regulations account for nearly 25 percent of the cost of a single-family home and more than 40 percent of the cost of a typical apartment development.

“The time and costs associated with complying with a multitude of government regulations can be significant for small- and medium-sized builders and ultimately limit housing supply,” Hughes said.

At the federal level, President Donald Trump has outlined several initiatives aimed at addressing housing affordability. Last month, he signed an executive order restricting Wall Street firms from purchasing single-family homes.

“Hard-working young families cannot effectively compete for starter homes with Wall Street firms and their vast resources,” Trump wrote in the order. “Neighborhoods and communities once controlled by middle-class American families are now run by faraway corporate interests.”

In December, Trump said he planned to introduce what he described as aggressive housing reform proposals and indicated support for leadership at the Federal Reserve that would favor lower interest rates. On Jan. 30, he announced that former Federal Reserve Governor Kevin Warsh would succeed Jerome Powell as Federal Reserve chairman when Powell’s term expires in May.

“Warsh certainly wants to cut rates. I’ve been watching him for a long time,” Trump told reporters.

Analysts note that further declines in mortgage rates would likely continue easing affordability pressures, though housing supply and broader economic conditions remain key factors in determining whether recent improvements persist.