Want to buy a home in the United States? Well, think about it only if you earn at least $1,08,000 (around Rs 91.15 lakh) or more, a report said. This change, highlighted in a recent report from Oxford Economics, underscores the rapid shift in the housing market. In the third quarter of 2024, only 36% of US households had enough income to afford a new home, compared to 59% in the same period five years ago. This sharp decline reflects the challenges many Americans now face buying a property.
The new numbers are in stark contrast to just a few years ago. In 2019, a household needed only $56,800 (around Rs 48 lakh) to comfortably cover the cost of a new single-family home, including property taxes and insurance.
The massive surge in housing prices over the last five years is largely due to the disruption caused by the pandemic. During COVID-19, many Americans sought larger homes, leading to a surge in demand. Simultaneously, the country experienced a shortage of available homes, which, combined with rising demand, pushed home prices to new heights.
The affordability crisis is most apparent in certain cities. San Jose, California, for example, has become the least affordable metro area in the US, with a median house price of $1.89 million (around Rs 16 crore). To afford a home there, a household would need to earn $4,61,000 (Rs 3.89 crore) annually. Other major California cities such as San Francisco, Los Angeles and San Diego also rank among the least affordable regions.
Cleveland, Louisville, Detroit and St. Louis were among the more affordable cities, where households needed an income ranging from $64,600 to $75,300 (Rs 54 lakh to Rs 64 lakh) to manage housing costs.
Oxford Economics defines a home as affordable if the monthly payment does not exceed 28% of a person’s income. “While house prices increased in every metro, the rise in mortgage rates eroded affordability more significantly as rates nearly doubled from 3.7% in Q3 2019 to a high of 7.3% in Q4 2023,” Barbara Denham, a senior economist at Oxford Economics, told CNN.