A drop in median household income is pushing many would-be buyers out of the market, where home prices are steadily increasing. Home values are significantly outpacing household incomes with the average home now costing 5.4 times more than a typical buyer’s gross salary, says CNBC.
Over the past 50 years, Census data has revealed even more shocking statistics which show a 118% increase in home prices with only a 15% rise in median household income. As a result, first-time home buyers are at an even greater disadvantage as they battle low affordability without additional funds from a previous home sale to help.
To afford a home in 2021, Americans need an average income of $144,192 — far more than the median household income of $69,178, Clever Real Estate found.
A common rule of thumb to determine how much you should spend on housing is that it should be no more than 30% of your gross monthly income, which is your total income before taxes or other deductions are taken out.
Some experts — and lenders — say a home’s sale price should not exceed 2.5 times your annual salary.
However, with home prices rising exponentially faster than income, it is increasingly difficult to do this, noted Francesca Ortegren, Clever Real Estate’s data scientist.
After the pandemic caused housing prices to spike, homes now cost 5.4 times more, on average, than a typical buyer’s gross income.
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