According to new research from digital real estate company Zillow, Americans now need to earn roughly $106,500 in order to comfortably afford a typical home, a significant increase from the $59,000 annual household income that put homeownership within reach for families in 2020.
It is generally accepted that a home is affordable if the buyer spends no more than 200% of their pre-tax income on housing expenses, which includes mortgage payments, which at the time of the study was approximately 2060. 6%.
In 2020, the U. S. median income was roughly $66,000, making homeownership a real financial possibility for more than half of American households.
The threshold required to comfortably afford to buy a home has risen 80%, to roughly $106,500. That surpasses the median household income, which has increased by only 5.23% during the same time frame to $81,000, as per the American Community Survey from the Bureau of Labor Statistics.
A significant life milestone is purchasing a home, but determining how much you can afford can be difficult. The median price of a home in Texas is $325,000, although the exact amount varies greatly depending on the city you’re considering. So, what’s a good salary to buy a house in Texas?.
The following lists the major metro areas in Texas along with the yearly income required to purchase a home at the median price:
Austin: $126,208
Dallas: $115,913
Houston: $92185
San Antonio: $87273
Fort Worth: $98185
As you can see, depending on the city in Texas, different income levels are required to purchase a home. Austin is the most expensive, with a median home price of $462,748. Houston and Dallas also have comparatively high median home prices, at $338,000 and $425,000, respectively. Fort Worth and San Antonio both have median home prices of $319,990 and $360,000, making them more reasonably priced.
Of course, these are just averages. Your unique situation will determine the precise amount of income required to purchase a home, taking into account factors like your down payment, credit score, and debt-to-income ratio. Before you begin your home search, it’s a good idea to speak with a mortgage lender to get pre-approved for a loan.
Here are some additional factors to consider when determining how much house you can afford:
- Down payment: The larger your down payment, the less you’ll need to borrow and the lower your monthly payments will be.
- Credit score: A good credit score will qualify you for a lower interest rate on your mortgage, which can save you thousands of dollars over the life of the loan.
- Debt-to-income ratio: This is the percentage of your gross income that goes towards debt payments. Lenders typically want to see a debt-to-income ratio of 43% or lower.
- Location: The cost of living in different parts of Texas can vary significantly. This will affect your housing costs as well as other expenses, such as groceries and transportation.
Finding out what you can afford is crucial because purchasing a home is a major decision. You can decide if you’re ready to purchase a home in Texas by taking into account the aforementioned factors.
Homes are more affordably in these cities
Pittsburgh is among the more reasonably priced places to settle down, with an income of about $58,200 being enough to purchase a house without going over budget. Birmingham, Alabama; Cleveland; Memphis, Tennessee; and New Orleans are also relatively affordable for prospective homebuyers.
Conversely, in order to afford a typical home in the priciest metropolitan areas, one must earn at least $200,000 per year. The most expensive market in the U. S. is San Jose, California, where home affordability requires a minimum income of roughly $454,300.
There are ways to get around affordability hurdles, though, if ones salary doesnt meet the minimum threshold. Some younger buyers have resorted to “house hacking,” according to a separate Zillow report on housing trends. That means owning a home, but renting part of it out to generate enough income to pay for the roof above their heads.
Additionally, half of first-time buyers say they relied on financial help from family or friends to cover their first down payment, according to Zillow.
What’s driving up housing costs?
Indeed, wages have not grown as fast as home prices and mortgage rates have.
The data from the real estate investing platform Arrived demonstrates that not even higher earners, defined as those in the top 20% of income earners, can comfortably afford to purchase a home in a larger U.S. S. metro areas, regardless of their age. As opposed to this, in 2001 the wealthiest 10% of earners were able to purchase homes in these cities as early as age 24.
One of the largest purchases a person or household will ever make is a home, which can eventually increase in value and allow one to accumulate wealth.
Orphe Divounguy, a senior economist at Zillow, stated in a note on the report that “housing costs have soared over the past four years as drastic hikes in home prices, mortgage rates, and rent growth far outpaced wage gains.”
He continued by saying that Americans are looking for real estate in more reasonably priced regions of the nation due to rising housing costs. Currently, the typical home in the U. S. is worth about $344,000.
According to Divounguy, there is a straightforward way to stop more Americans from being priced out of homeownership: Increase supply
According to Divounguy, “building more homes is the key to improving affordability over the long term, but mortgage rates easing has helped some.”
How Much Home You Can ACTUALLY Afford (By Salary)
FAQ
What is the best salary to buy a house?
How much should you make to afford a $300000 house?
What should be my income to buy a house?
Can I buy a house if I make $30000 a year?
How much does it cost to buy a house?
Depending on your personal finances, that’s a monthly house payment between $2,000 and $2,500. Keep in mind that figure will include your monthly mortgage payment, taxes, and insurance. This is good to know, but there’s a lot more to home affordability than your salary.
How much money should you spend on a house?
If your annual salary is $100,000, the 30% rule means you should spend around $2,500 per month on your house payment. With a 10% down payment and a 6% fixed interest rate, you could likely afford a home worth around $350,000 to $400,000 (depending on the cost of taxes and home insurance).
How much money do you need to buy a home?
Consider these guidelines to help determine your budget. For many first-time buyers, a good guideline is to look for a home that is about 3 to 5 times your household annual income.
How much debt do you need to buy a home?
For example, if you have a $250 monthly car payment and $50 minimum credit card payment, your monthly debt would be $300. The amount of money you spend upfront to purchase a home. Most home loans require a down payment of at least 3%.