Housing Affordability in 2025: Why You Now Need $114K to Buy a Home

In 2025, the typical U.S. homebuyer needs to earn $114,000 a year to comfortably afford a median-priced home. That’s $47,000 more than what was needed in 2019. Rising home prices, high mortgage rates, and increased insurance costs have pushed housing affordability to some of the lowest levels in recent memory.

In the span of just a few years, the dream of homeownership has slipped further out of reach for millions of Americans. While headlines talk about mortgage rates leveling off and the housing market stabilizing, the bigger issue remains: affordability has not improved—and for many, it’s worse than ever.

According to a new report from Realtor.com, the median list price of a U.S. home in April 2025 was $431,250. That’s a steep jump from pre-pandemic levels. But the real shock comes from what it now takes to buy one.

To afford a home at that price, a household needs an annual income of at least $114,000. That figure includes the cost of mortgage payments, property taxes, and insurance. Six years ago, a similar home would’ve only required around $67,000 in yearly income. That’s a 70% increase in just over half a decade.

Why Has Housing Affordability Gotten So Bad?

The problem comes down to three key factors: home prices, mortgage rates, and stagnant wages.

1. Home Prices Are Still High
Even though the rate of price increases has slowed in some markets, prices haven’t dropped significantly. Low inventory has kept values high in many areas, especially in desirable suburbs and cities with strong job markets.

2. Mortgage Rates Have Doubled Since 2021
In 2021, mortgage rates were hovering around 3%. As of 2025, they’re closer to 7%. That change alone adds hundreds, even thousands, to monthly payments—making it harder for buyers to qualify for loans.

3. Wages Haven’t Kept Up
While there’s been some wage growth, it hasn’t matched the pace of rising housing costs. The typical household income in the U.S. is still well below the $114,000 needed to afford the average home today.

What This Means for First-Time Homebuyers

For first-time buyers, the gap between what homes cost and what they can afford has never been wider. In the past, young professionals could save for a down payment, get a starter home, and build equity over time.

Now, even with good credit and stable jobs, many are priced out of the market. That’s leading to more people delaying homeownership or giving up on it altogether.

Some are moving to more affordable states or smaller towns. Others are turning to family for help with down payments or co-signing. But for a growing number, homeownership simply isn’t on the table right now.

Will Things Get Better?

It depends on who you ask. Some economists believe that if mortgage rates drop slightly and more inventory comes onto the market, affordability will gradually improve. Others argue that unless wages see a major increase—or home prices correct significantly—the current gap is here to stay.

There’s also the wild card of inflation. While it’s cooled somewhat, it still affects household budgets. Higher food, gas, and utility costs make it harder to save for a home, even if prices begin to dip slightly.

What Buyers Can Do in the Meantime

If you’re hoping to buy a home but feel priced out right now, you’re not alone. Here are a few things you can do to stay prepared:

• Improve Your Credit Score: A higher score can lower your mortgage rate, saving you money long-term.
• Build a Bigger Down Payment: The more you put down, the less you’ll need to borrow.
• Consider Smaller Markets: Look outside major metro areas for more affordable options.
• Explore First-Time Buyer Programs: Some states and lenders offer assistance or lower interest rates to new buyers.
• Stay Informed: Keep an eye on local trends. Housing markets vary widely by region, and what’s true nationally may not apply in your area.

Final Thoughts

Housing affordability in 2025 is at a critical point. Needing $114,000 a year to buy a median-priced home is a wake-up call for the market—and for policymakers. While some signs point to stabilization, it’s clear the system isn’t working for the average household.

Whether you’re planning to buy soon or just watching the market, understanding the numbers helps. The more informed you are, the better decisions you can make. And even if you’re not ready to buy today, there are steps you can take now to be in a stronger position when the time comes.