Time For a Raise
Average Houston home buyer needs 70% more income than in 2020, study finds
Of all the things that have changed since the coronavirus pandemic began in 2020, one of the most drastic is the residential real estate market.
In 2020, according to a new report from real estate company Zillow, a household earning $59,000 annually could comfortably afford the monthly mortgage on a typical U.S. home, spending no more than 30 percent of its income with a 10 percent down payment.
That was below the U.S. median income of about $66,000, meaning more than half of American households had the financial means to afford homeownership.
Now, the average U.S. home shopper needs to make more than $106,000 to comfortably afford a home.
That's a difference of more than $47,000 in just four years. Or, put another way, the income needed to comfortably afford a home is up 80 percent since 2020, while median income has risen just 23 percent in that time.
In Houston, things are only slightly better. As of January 2024, Zillow has calculated $95,374 as the necessary income benchmark for home affordability here.
That's a change of $39,779 from 2020 — more than 70 percent — using Zillow's Home Value Index to estimate the typical Houston home price of $300,955.
Assuming a 10 percent down payment, Zillow's monthly mortgage payment in Houston hovers around $1,920 (compared to the U.S. average of $2,188).
That monthly mortgage payment on a typical U.S. home has nearly doubled since January 2020, up 96.4 percent. Home values have risen 42.4 percent in that time, with the typical U.S. home now worth about $343,000.
Mortgage rates ended January 2020 near 3.5 percent, keeping the cost of a home affordable for most households that could manage the down payment. At the time of Zillow's analysis, mortgage rates were about 6.6 percent.
San Antonio joins Houston on the "affordable" side of the report, with a yearly income of $95,767 needed to afford a $283,161 home, paying $1,807 after 10 percent down.
Elsewhere in Texas, Dallas has soared past the $100K mark to $121,398, or a $2,340 monthly mortgage on a $366,690 home.
Austinites need to earn $149,267 yearly to afford a $451,322 home, paying a whopping $2,880 a month.
California, not surprisingly, requires the highest incomes: San Diego ($273,613) and Los Angeles ($279,250) seem downright cheap compared to San Francisco ($339,864) and San Jose ($454,296), where the latter expects buyers to plunk down nearly $1.5 million for a home and pay almost $10,000 per month in mortgage.
Seattle and New York round out the eye-popping top of the list, while Pittsburgh, Memphis, Cleveland, and New Orleans are deemed the most affordable. Only Pittsburgh is close to 2020's numbers, requiring $58,232 in income for a $1,286 monthly mortgage.