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The Key Takeaways
- The housing affordability of 2024 improved slightly, but buying the median-sized house remains beyond many U.S. adult buyers.
- A recent Redfin study found that many first-time homebuyers struggled to keep the mortgage payment below one-third their gross income.
- You can make home ownership more affordable by comparing mortgage interest rates.
For the first time in four years, housing affordability in the U.S. didn’t get worse in 2024, but that doesn’t mean homebuying is easy—at least for most people.
Redfin released a report that said a family earning median income in 2024 and purchasing a house priced at the median would spend 41.8% on their income. This is down from 42.2% of income in 2023. This is still far more than most buyers will pay. This is higher than most experts would recommend.
Many lenders are reluctant to approve a mortgage that exceeds 28% of a buyer’s gross income. In many metropolitan areas, however, these guidelines are difficult to meet because of the current housing market and interest rate. Redfin’s report states that a household must earn at least $116.782 annually to not spend more than 30 percent of their income on housing. Only 39% of American households earn more than six figures per year, which makes homeownership unattainable for the majority of Americans.
Should you spend more to buy a house?
Do you spend too much on housing?
Do you really want to accept a loan that will cost more than 30% your monthly salary? Look at the mortgage within the context of your personal financial situation.
This simple rule is one of the most popular ways to budget. According to this rule, 50% of income should be allocated to essentials (such as shelter, food, medical expenses, transportation and debt repayments), 30% to wants (such as eating out, holidays, entertainment) and the rest 20% to savings.).
If your household has a monthly income of $84,000 and you have a few wants, then your expenses should come to around $3,500, while your savings will be about $1,400. If you bought a $430,000 median priced home with the average current mortgage rate of 6.99% you would only pay $2,286 in principal and interest (assuming you put down 20%). According to 50/30/20 Rule, this would only leave $1,214 available for your homeowners insurance, utility bills, property tax, food and health care.
If you take on a mortgage that eats up that percentage of your income, it’s unlikely that you can keep the rest of your nonnegotiable expenses low enough to stay in the 50% range—especially if you have to pay other debts on top of regular household expenses (like student loans or credit card debt).
You can save more by being creative with your housing
The average American household’s chances of owning a home are bleak. There are several things you can do to increase your chances of buying a home. These are some ideas you might want to think about:
- RefinanceIn 2025, the Fed will likely make modest cuts to interest rates. Refinancing could bring relief to those who can afford a slightly higher mortgage for the next two years.
- Reduce spending elsewhereYou can make your budget function even if you cannot keep essential expenses within the guideline of 50%. Just reduce your discretionary expenditures or your savings. Just keep in mind that these adjustments impact your lifestyle—both now and in retirement.
- Consider moving to an area that is more affordable: The average home price in the U.S. is about $430,000, but there are markets with much higher—and lower—prices. You’ll be able to manage your mortgage payments much more easily if you decide to move to an affordable area like Pittsburgh, Cleveland or St. Louis than you would if you chose to live in Anaheim or Boston.
- House hackingShare your home with other people (as in taking roommates, or renting out an additional dwelling unit) is a popular way for homeowners to reduce the cost of their mortgage.
- You can save more money by paying a higher down paymentIt could take you a couple of years longer to own your home. The monthly payments will be smaller if you make a bigger down payment. Earn more interest by putting your money into a high yielding savings account this year. This will allow you to make a larger down payment the following year.
Article Sources Investopedia asks writers to cite primary sources in their articles. White papers, data from the government, interviews with experts, and original reporting are all examples. Where appropriate, we also refer to original research by other respected publishers. Our website contains more information about our standards for producing accurate and unbiased content. Editorial policy
Redfin. "Housing Affordability Didn’t Worsen in 2024—The First Time in Four Years That Has Happened."
United States Census Bureau. "Income in the Past 12 Months (in 2023 Inflation-Adjusted Dollars)."
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