The U.S. housing market is only getting tighter as buyers with six-figure incomes snag properties while average earners are getting priced out entirely.
The median household income for homebuyers surged from $88,000 the previous year to $107,000 — the largest increase on record at 22% — according to the National Association of Realtors (NAR).
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“In a still-competitive housing market, more well-off home buyers were able to have their bids accepted by offering larger down payments and even by paying cash,” Jessica Lautz, NAR deputy chief economist and vice president of research, said in a press release.
The real median household income in the U.S. was just shy of $75,000 in 2022, according to the Census Bureau — less than three-quarters of what the NAR report indicates homebuyers need to earn these days.
Here’s what’s contributing to the affordability issue and what some analysts are forecasting for the housing market next year.
More Americans are getting pushed out
It’s becoming increasingly difficult for prospective buyers to step into real estate, with mortgage rates stretching above 7% and market listings being squeezed by greater demand than supply.
Some wealthy buyers are sidestepping the issue of higher mortgage rates by paying in all cash, while others are making bigger down payments to get better terms on their loan. There are also those who are getting their parents to pitch in to help them with their down payment.
The housing affordability issue could also be widening the wealth gap as well — with homeowners who bought when mortgage rates were low, or prior to the COVID-19 pandemic, building wealth through rising equity from their properties, while others are uncertain they will ever be able to purchase a home.
“High mortgage rates are exacerbating inequality between people who own homes and people who don’t,” Redfin senior economist Sheharyar Bokhari said in a recent report.
“Home prices are roughly 40% higher now than before the pandemic homebuying boom, and soaring mortgage rates have made the divide even bigger by adding more to monthly payments.”
Read more: Super-rich Americans are snatching up prime real estate abroad as US housing slumps — but here's a sharp way to invest without having to move overseas