You'll Now Need a 6-Figure Salary to Afford the Average U.S. Home

Sadly, that's not so shocking given today's home prices and borrowing rates.

It's probably not a secret that the cost of homeownership has risen substantially over the past couple of years due to a combination of elevated home prices and higher mortgage rates. But even if you earn a higher-than-average salary, it may not be enough to afford the typical home today.

New data from Redfin reveals that to be able to afford the average U.S. home, you need a salary of $107,281. That assumes a monthly mortgage payment of $2,682.

And the worst part? A year ago, it took a salary of just $73,668 to afford the average home. But since mortgage rates have more than doubled since then, it now takes a lot more earnings to be able to make the leap into homeownership.

Can you afford to buy a home?

In some markets, it may not take a six-figure salary to be able to purchase a home. But to avoid getting in over your head, you should know that your housing costs, including not just your mortgage payment, but also, your property taxes and homeowners insurance, should not exceed 30% of your take-home pay.

So maybe you live somewhere where homes cost less than the average U.S. home. You might also earn a lot less than $107,281. But let's say you're able to find a home that comes with a $1,000 monthly mortgage payment. And let's say your property taxes and insurance costs amount to $300 a month. If you bring home around $4,333 a month, that means you should, in theory, be able to swing that home. And if your take-home pay is $4,333, it means your base salary isn't upward of $100,000.

When will homeownership become more affordable?

A big reason it takes such a huge salary to own a home these days is a combination of high listing prices and mortgage rates. Both could come down in time -- but the question is, when?

Mortgage rates might continue creeping upward for a while before dipping down to more moderate levels. But if housing inventory picks up a lot in 2023, that could lead to a significant drop in home prices.

The whole reason sellers are getting away with charging such high prices for their homes is that there's not enough housing supply to meet buyer demand. But as more homes hit the market and the competition increases, sellers will start to lose their edge -- and they'll have to be willing to lower their prices to get offers.

What this means is that if you can't afford a home right now, don't get too discouraged. That situation could change in a few years based on housing market conditions.

And also, your personal finance picture might change for the better. You might get a promotion at work and a raise to go along with it. So if homeownership isn't in the cards right now, do your best to keep saving money to position yourself to buy a place of your own when the time is right.