New homebuyers must make an average of $115,000 to afford the average U.S home, according to studies from Redfin. That’s about $40,000 more than the typical American earns. Nationally, prices are up 15% from only a year ago, and an astonishing 50% since the start of the pandemic.

Mortgage rates have continued to climb since August when they were at an average fixed rate of 7.07%. As of Oct. 12, they currently reside at 7.57%, the highest record in over two decades. On top of that, low inventory is adding gasoline to the fire that is high housing costs. In August, the average U.S home sold for about $420,000, rising 3% year over year.

In recent interview, Redfin Economics Research Lead Chen Zhao explained that, “In a homebuyer’s ideal world, rising mortgage rates would push both demand and home prices down, at least enough to make up for high interest payments. “But that’s not what’s happening now,” Zhao said. “Although new listings are ticking up slightly, inventory is still near record lows as homeowners hang onto their low mortgage rates—and that’s propping up prices”. He also said that first-time buyers should consider a townhouse or condo in this current economy.

Average U.S monthly mortgage is at an all-time high

The average monthly mortgage payment is currently $2,866, the highest it has ever been, 20% year over year. Payments have also increased substantially since the beginning of the pandemic, when low mortgage rates were coupled with soon-to-be skyrocket home prices. For instance, in August 2020, the typical monthly payment was $1,581. Based on the average mortgage rate of 2.94% and the present median home price of $329,000, a homebuyer would have needed to earn $75,000 per year to afford the average home.

The average U.S household earns substantially less than the income needed

In 2022, the median household income was around $75,000. Hourly wages have risen in 2023, but not quickly enough to keep up with the rising costs of affording a home. The average U.S hourly wage has risen 5% over the last year, but most Americans are still $40,000 short of affording the median-priced home.

However, buyers that pay with cash aren’t impacted by the high mortgage rates, and typically earn more than the income necessary to purchase a home, regardless. Buyers who are selling their homes to purchase another one are also better off as they have likely built up equity. The issue appears to affect those who purchased at the height of the pandemic: Not only are they giving up a low rate, but they have also lost substantial amounts of money.

Income needed to buy a home has risen in all major metros

The five metros where necessary income has increased by over 30% are:
1. Miami
2. Newark, New Jersey
3. Bridgeport, Connecticut
4. Dayton, Ohio
5. Rochester, New York

Both Miami and Newark showed the biggest increase across the major U.S metros: Homebuyers must earn 33% more than one year ago to afford the typical home. Homebuyers in Miami must earn $143,000 annually to afford the typical monthly mortgage payment of $3,580, while Newark homebuyers must earn $160,000 to afford $3,989 monthly.

Homebuyers now must earn at least six-figures to buy a home in half the country’s major metros. In the most expensive markets, San Francisco and San Jose, California, buyers must earn a whopping $400,000 annually.

Overall, sky-high mortgage rates have caused necessary increases in income in every major metro, even the places where prices have declined over the past year

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