Only about 40% can buy a home in the US: how much do you need to earn?
An analysis revealed how much income is needed to buy a first home in the US and why less than 40% of households can achieve it
Buying a home continues to be one of the main goals of millions of families in the United States. However, the increase in housing prices has meant that fewer and fewer people are able to take that step. A new analysis reveals how much annual income is needed to purchase a first home and why the majority of households still renting cannot afford it.
According to a LendingTree study, only 38% of non-homeowner households have enough income to purchase an entry-level home. The company defines this type of property as those occupied by its owners and whose value is within the cheapest 25% of the market.
The average price of a first home is $200,000 dollars and, although they tend to be smaller properties or require some repairs, they represent the opportunity for many families to begin generating wealth.
How much money does it take to buy a first home?
The analysis indicates that a household must earn just over $62,000 dollars a year to be able to purchase a home of this type. However, the average annual income among those who do not yet have their own home is $55,000, so there is a difference of more than $7,000, equivalent to approximately 13%.
“It's safe to say that most people don't get pay raises of $7,099 a year,” said Matt Schulz, chief consumer finance analyst at LendingTree. "That means making up that gap might require extra work, a second job, or other sacrifices. But that's difficult, especially given the many obligations people already have."
As often happens in the United States, the differences are even greater in some states. In California, for example, the median income of a homeless household is $72,900, but it takes $140,676 a year to purchase a starter home with a median price of $482,000.
“For many, it seems completely unattainable,” Schulz said. "It's a shame, because home ownership can be a powerful wealth-building tool and a real source of stability for families. However, the numbers involved are so daunting that many people don't see a realistic way to enter the market."
The report also coincides with recent data from Zillow, which shows that 242 cities in the United States already have entry-level homes priced at $1 million or more, a figure that has tripled since 2020.
In terms of affordability, Mississippi leads the list of states where it is easiest to buy a first home, with nearly 62% of households able to afford it. West Virginia follows with 58%, as well as Arkansas and Alabama, both with 54%. At the opposite extreme are Rhode Island, where only 16.5% of households can afford a starter home, followed by Utah and Hawaii.