The income needed to buy a home in the United States has started to move lower after years of steady increases. But for many households, homeownership is still out of reach.
A new report from Redfin shows that buyers now need to earn $111,252 per year to afford the typical home for sale. That figure is down 4% from $115,870 a year ago. It also marks several months of gradual improvement after peaking above $122,000 in June 2025.
While the change offers some relief, the gap between home prices and household income remains wide.
Why the Income Needed to Buy a Home Is Falling
The recent decline is tied to two main factors:
- Mortgage rates have eased.
The average rate is now around 6.1%, down from nearly 7% last year. - Monthly payments have dipped.
The median monthly mortgage payment is about $2,675, compared with roughly $2,800 a year ago.
Even though the median home-sale price has inched up to $426,747, lower borrowing costs have helped reduce the income threshold required to qualify.
Redfin defines a home as affordable when a buyer spends no more than 30% of gross income on housing, including mortgage payments and property taxes. The analysis focuses on December 2025 data, the most recent full month available.
The Income Gap Still Remains
Despite improvement, affordability remains a challenge.
The typical U.S. household earns an estimated $86,185 per year, which is about $25,000 less than what is needed to afford the median-priced home.
That means:
- Higher-income households are beginning to reenter the market.
- Middle- and lower-income families are still largely priced out.
- First-time buyers continue to face the biggest hurdles.
Wages did rise about 4% from 2024 to 2025, which helps. But income growth has not fully caught up to the rapid home price increases seen since 2020.
Affordability Improving in Most Major Metros
Homebuying conditions are getting better in many parts of the country. According to Redfin, affordability improved in 37 of the 50 most populous metro areas.
Cities Seeing the Largest Improvements
- Dallas, TX
Income needed: $112,175 (down 7.4%)
Monthly payment: $3,191 (down about $300 year over year) - Sacramento, CA
Income needed: $148,102 (down 6.8%)
Monthly payment: $3,752 (down from $4,090) - Jacksonville, FL
Income needed: $97,898 (down 5.9%)
Monthly payment: $2,161 (down from $2,337)
San Jose and Austin also recorded notable improvements. In these cities, price declines helped lower the income needed to buy a home.
Where Affordability Is Getting Worse
Some metro areas are still moving in the opposite direction.
- Detroit, MI
Income needed: $74,912 (up 3.6%) - Chicago, IL
Income needed: $105,440 (up 3.5%) - St. Louis, MO
Income needed: $73,984 (up 3%)
Buffalo and Cincinnati also saw increases. In these cities, home prices rose enough to push required income higher.
Most Affordable Major Markets in 2026
In only 12 of the 50 largest metro areas does the typical household earn enough to comfortably afford a home.
Top Affordable Markets:
- Pittsburgh, PA
Income needed: $66,168
Median household income: $82,188 - St. Louis, MO
Income needed: $73,984
Median income: $87,471 - Cleveland, OH
Income needed: $66,725
Median income: $76,912
In these markets, home prices remain well below the national median, giving buyers more room in their budgets.
Most Expensive Housing Markets
On the other end of the spectrum, coastal cities still require very high incomes.
- San Jose, CA — $374,241 needed
- San Francisco, CA — $291,256
- Los Angeles, CA — $248,307
- San Diego, CA — $231,151
- New York, NY — $196,544
These areas remain far beyond reach for the average household.
What Happens Next for Housing Affordability in 2026?
Economists expect gradual improvement if:
- Mortgage rates stay near current levels
- Wage growth continues
- Home prices remain stable
However, buyers are also watching broader economic conditions. Layoff concerns and economic uncertainty may keep some households cautious, even as affordability improves slightly.
The income needed to buy a home 2026 may continue trending lower, but meaningful relief will likely require a combination of stronger wage growth and further stability in borrowing costs.
Bottom Line
Housing affordability is no longer worsening month after month. That alone is a change from the past five years.
Still, the typical American household does not earn enough to comfortably buy the median-priced home. The market is improving, but it has not fully reset.
For now, the door to homeownership is opening a little wider but it is not fully open for everyone. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.
