The American dream of homeownership is harder to reach now than at almost any other time in history. Housing prices have soared over the last few years while incomes have lagged, making buying a new home a pipe dream for many Americans.
Zillow recently compiled data from the American Community Survey (ACS) and Moody’s Analytics through 2022 to determine how much potential homeowners would need to earn each year to comfortably afford a home in various metro areas throughout the United States.
Though the numbers don’t paint a pretty picture, some areas are more affordable than others.
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1. Why are homes so expensive in 2024?
Real estate prices have skyrocketed since 2020 — Zillow determined that home prices have increased a whopping 42.4% since the first quarter of 2020, compared to a 23% increase in wages during the same period.
Average mortgage payments after a 10% down payment have almost doubled, an increase of 96.4% and an average of $2,188 per month.
It’s a nuanced problem with many contributing factors, but the most blatant is simply a supply-and-demand issue. There aren’t enough houses for the people who want to buy them, so prices have increased—the classic seller’s market.
Higher interest rates are also to blame. The Fed raised rates multiple times in 2023 to help offset booming inflation, which means mortgages are more expensive than they’ve been in years.
Higher rates mean higher mortgages, which means fewer people are willing to take the plunge and take on a new loan. Fewer people moving means fewer homes on the market.
And then there’s the wages problem. Wages have not increased to keep up with home prices and the surging cost of living. So while homes are more expensive, most people just aren’t earning enough to purchase them.
So, how much do you need to earn to buy a home in 2024? Around $106,000 per year, and that’s just the average. Some metros require considerably higher incomes to comfortably own a home, while in a few, you can get by by earning less.
2. 5 cities where homes are most affordable
Zillow took a look at home prices and incomes in metros throughout the U.S. and found that it’s cheaper to own a home east of the Mississippi. The five cities where the income required to comfortably own a home is lowest are:
| City | Income needed to afford a home |
| Pittsburgh | $58,232 |
| Memphis | $69,976 |
| Cleveland | $70,810 |
| New Orleans | $74,048 |
| Birmingham | $74,338 |
The only cities in the U.S. where people who earn the national median income ($31,133) can comfortably afford a home are Pittsburgh, St. Louis, and Detroit.
3. 5 cities where homes are least affordable
On the other end of the spectrum and the other side of the country, potential homeowners need to earn significantly more to comfortably afford a home out west. The five cities where the income required to comfortably purchase a home are:
| City | Income needed to afford a home |
| San Jose | $454,296 |
| San Francisco | $339,864 |
| Los Angeles | $279,250 |
| San Diego | $273,613 |
| Seattle | $213,984 |
New York City and Boston also require $200,000+ earnings — coming in at $213,615 and $205,253 respectively.
Bottom line
Homeownership is more expensive now than ever, and wages are not keeping up with real estate prices. For most households to save enough money would take 8.5 years to make a 10% down payment on a home.
Over half of first-time buyers say that a portion of their down payment came from family or friends, and many Gen Z buyers are going in on homes with friends to help pay for their mortgage .
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