BAM Key Details:

  • According to a new survey from Clever Real Estate, prospective buyers need to earn at least $119,769 annually to afford a median-priced home of $332,494 with a 10% down payment. 
  • That income is $45,000 more than the typical American household earns per year ($74,755). 
  • Homes are affordable on today’s median salary in four states—West Virginia, Ohio, Iowa, and Indiana—and six of the 50 largest U.S. metros. 

Today’s home buyer needs to earn at least $119,769 a year to comfortably afford a median-priced home with a 10% down payment. 

According to a new survey from Clever Real Estate, the current median home price is $332,494. With a 20% down payment, the typical home buyer would still need to earn a minimum of $98,202, still well above the typical U.S. salary. 

According to data from the National Association of Realtors® (NAR), the last year the median home buyer put 20% down on a home was 1989. Today, the median buyer puts down 15%. 

Running the numbers

The median U.S. income is sitting at $74,755. With a 10% down payment, a buyer earning that amount could afford a home priced at $207,529—38% less than the current median home price. 

A median-income household aiming to purchase a median-priced home in today’s market would need to put down 45% of the home’s sale price, or mortgage rates would need to fall to 4%, for the numbers to work in their favor. 

Even if a buyer saves at a rate of $1,000 a month, it would take them 5.5 years to save the $66,500 needed for a 20% down payment on today’s median-priced home ($332,494).

As it stands, even with a 20% down payment, 61% of American homebuyers have been priced out of the market. 

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Affordability varies by state and metro area

The median-priced home is affordable on the median salary in only four states—West Virginia, Ohio, Iowa, and Indiana—and six of the 50 largest U.S. metro areas:

  1. Pittsburgh, PA
  2. Cleveland, OH
  3. St. Louis, MO
  4. Memphis, TN
  5. Indianapolis, IN
  6. Birmingham, AL
Clever-Real-Estate-Homes-are-affordable-in-six-of-the-50-largest-metros

At the other end of the spectrum, California is the least affordable state. And Los Angeles is the least affordable U.S. metro. Buyers in L.A. need an annual income of $249,471 to realistically afford a median-priced home, which comes with a price tag nearly three times the actual median local income of $87,743. 

First-time buyers need an even higher income to afford a median-priced home

First-time buyers typically make smaller down payments on a home purchase, mainly due to the time it takes to save 10% or more, let alone 20%. 

The typical down payment for a first-time homebuyer is 8% of the home’s sale price—less than half the typical 19% for repeat homebuyers, according to NAR data

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Clever-Real-Estate_First-time-homebuyers-make-smaller-down-payments-and-need-higher-incomes

As previously mentioned, with a 10% down payment, the typical homebuyer needs a household income of at least $119,769 a year, based on an average 30-year fixed rate of 7.22%, to comfortably afford a median-priced home in the U.S. ($332,494).

With a lower income, the monthly mortgage payment ($2,795) would consume more than 28% of the buyer’s household income. 

Read the full report for more information, including charts and methodology.