Income needed to buy a typical US home remains near record high of $110,000

The annual income required to afford a typical American home remained near a record high in June 2026 amid a continuing affordability crisis that has pushed first-time buyers to the margins of the housing market and locked millions of renters out of ownership entirely.

A household needs to earn $109,796 a year to comfortably afford the median-priced US home according to new data from Redfin (defined as spending no more than 30% of monthly gross income on a mortgage payment) which is down slightly (0.5%) from the $110,382 required a year earlier. The

median American household earns $87,599, leaving a gap of roughly $22,197. While that shortfall has narrowed from $26,125 a year ago and $28,834 two years prior, it remains a formidable barrier to entry for most buyers.

"Affordability has improved modestly for entry-level buyers, but starter homes come with tradeoffs," said Yingqi Xu, senior economist at Redfin, noting that move-in-ready properties attract stronger demand than fixer-uppers because first-time buyers typically lack the financial cushion for major renovations after closing.

Starter homes offer a narrow opening

The brightest spot in an otherwise grim affordability picture is the entry-level segment. The income required to afford a typical US starter home (properties in the 5th to 35th percentile of sale prices) fell 1.5% year-over-year to $70,693 in June 2026, outpacing the modest improvement seen across the broader market. Because the median household income of $87,599 exceeds the starter-home threshold by roughly $17,000 (compared with only $12,500 a year ago), more buyers technically qualify — at least on paper.

Starter home prices rose 1.2% year-over-year, a slower pace than the 2.2% gain for all homes, which helped drive that improvement. Twenty-two metropolitan areas now have starter home markets where all available inventory is affordable to the area median income earner, including Austin, Dallas, Charlotte, Washington D.C., Philadelphia, and Indianapolis.

However, the situation varies by geography led by Loas Angeles where starter homes consume 51% of the median household's income with typical entry-level prices hovering around $650,000. In San Francisco, starter homes run close to $1 million, and just 7.4% of listings in San Jose fall within reach of the median-income buyer.

A deeper structural problem

Beneath the month-to-month data lies a longer-term affordability collapse documented in the Joint Center for Housing Studies of Harvard University’s The State of the Nation's Housing 2026 report. The median existing home sale price reached nearly five times median household income in 2025, compared to a historical average of 3.2 times during the 1990s.

Home prices have climbed 54% since 2020, while the monthly mortgage payment on a median-priced home has nearly doubled from $1,240 at the end of 2020 to $2,420 by late 2025.

The Harvard report estimates households need approximately $120,800 annually to afford median-priced home payments under standard financing assumptions. Only 32% of US households meet that threshold. Among renters, just 16% qualify. That squeeze has pushed the first-time buyer share to an all-time low of 21% of all transactions (mid-2024 to mid-2025) and driven the median age of a first-time buyer to a record 40 years old.

The homeownership rate slipped to 65.2% in 2025, down from 65.9% in 2023, with the steepest decline among adults under 35, whose ownership rate fell from 39.0% in 2022 to 37.0% in 2025, according to the Harvard analysis.

What the data means for advisors

The data points to a widening divide in how real estate fits into personal financial planning. Clients in affordable heartland metros — St. Louis, Indianapolis, and Pittsburgh are among the few where median household income actually exceeds the income needed to buy a typical home — face very different housing calculations than those in coastal markets.

Average mortgage rates in the mid-to-high 6% range have compounded the problem. While rates eased slightly in early 2026, they climbed back toward 7% by late July, eroding the modest affordability gains that had emerged earlier in the year. The share of home listings affordable to a median-income earner rose to 34.2% nationally in June, up from 30.5% a year prior — a meaningful gain, though still well below historical norms.

The rental market offers little relief for those not yet on the property ladder. The Harvard JCHS report found that 22.7 million renter households (49% of all renters) were cost-burdened in 2024, meaning they spend more than 30% of income on housing. That figure has grown by 2.3 million since 2019. Median asking rents for new multifamily units reached $1,900 a month in 2025, with rents rising 29% nationally since 2020.

For clients debating whether to keep renting or stretch to buy, advisors may find that the calculus has become increasingly region-specific and client-specific. InvestmentNews coverage of the housing market and financial planning intersections has tracked how advisors are navigating these conversations with clients facing record affordability pressure.