Achieving the American dream of homeownership for buyers requires a six-figure-plus income and can be demoralizing as affordability issues continue to vex the nation's housing market, according to two new studies.
The typical American household needs at least $117,000 in annual income to cover the costs of a mortgage, according to a housing affordability study released Monday by personal finance website Bankrate.
A separate report from the National Association of Home Builders found that seven out of 10 U.S. households, or a total of about 94 million, can't afford a $400,000 home, roughly the median price for an existing U.S. home sold in February.
NAHB's 2025 Priced-Out Analysis shows the number of households able to buy at various price tiers. Each tier represents the number of households that can afford homes only within that specific price range, the trade group said.
Steadily rising home prices for more than a decade and mortgage rates remaining near 7% since the pandemic have made it more difficult for young consumers to swing a mortgage. Analysts don't expect large drops in prices or mortgage rates in the near future.
"If I were a first-time homebuyer, this would be quite disheartening," said Justin Benefield, a finance professor and academic director for the Winchester Institute for Real Estate Finance at Auburn University in Alabama, in an interview.
The US has an insufficient supply of lower-priced homes
NAHB's 2025 Priced-Out Analysis also revealed a severe shortage of affordable housing. For example, though roughly 53 million households can afford a home priced at $200,000 or less, there are only 22.4 million owner-occupied homes valued in this range, according to NAHB. At the next price tier up, there are only 15 million housing units for the 23.53 million households that can afford a $200,000 to $300,000 house.
The $117,000 the typical American needs to pay a mortgage includes the homeowner's insurance and property taxes for the given area, according to Bankrate. That's an increase from Americans only needing $78,236 a year in January 2020. In some states, including Hawaii and California, the $117,000 figure still isn't enough to afford a home, Bankrate said.
Bankrate's study is the latest entry in a growing body of economic research that shows it takes six figures for an American to afford a home. A November 2024 research brief from Oxford Economics determined it takes $107,700 to afford a new single-family residence, including taxes and insurance. GOBankingRates published a similar state by state study this month of how much it costs to afford a home.
Bankrate found that residents in Connecticut and Massachusetts need $136,168 and $174,392, respectively, to maintain a home. Other states along the Northeast, including New Jersey at $160,001 a year and New York at $160,300 a year, also are well above $117,000.
To be sure, there are 21 states where a six-figure salary is not needed, mostly in the South and Midwest, the Bankrate study found. Americans only need $77,262 in Alabama, for example, while Indiana, Kansas and Kentucky all require less than $87,000, according to Bankrate's findings.
Eventually, wage increases will outpace home price gains, and that's the key to making housing more affordable, according to researchers at the University of Mississippi and Florida International University.
While the rising costs of labor and materials make it even more difficult for homebuilders to offer affordable product, municipalities need to do their part in the equation by being more open to creative zoning, Auburn's Benefield noted.
"If builders were allowed to build more density in areas where density is a dirty word, that would go a long way," he said.