Buying a home now requires a $112,000 salary — and that's just the national median

US 30-year mortgage rate jumps to 7.28%

Monthly payments on median-priced homes up 1.8x in a year

Median age of first-time buyers hits record 40

Homeowners with low-rate loans stay put, deepening market freeze

A home listed for sale in the Brooklyn borough of New York City. [Getty Images]

Buying a home in the United States is becoming increasingly out of reach for the middle class. Purchasing a median-priced home now requires a household income of at least $112,000 a year, and in expensive major cities, even a $150,000 annual salary may not be enough. A fresh surge in mortgage rates to their highest level in three years is adding to the strain.

According to the Financial Times and the Associated Press, the average rate on a 30-year fixed mortgage stood at 7.28 percent annually as of Thursday — up 0.25 percentage points from 7.03 percent the previous week and the highest since November 2023. The weekly increase was the largest in roughly four years.

A year earlier, the 30-year rate was 6.34 percent. That nearly one-percentage-point rise over 12 months has significantly increased the monthly payments borrowers must carry.

The surge in US mortgage rates is being driven by rising long-term government bond yields. The prolonged war involving Iran has pushed up global oil prices and stoked inflation fears, sending the yield on the 10-year US Treasury note above 5 percent. Because mortgage rates track the 10-year yield closely, borrowing costs can remain elevated even if the Federal Reserve holds its benchmark interest rate steady. The AP calculated that on a $400,000 loan, the recent rate increase alone adds roughly $276 to the monthly payment.

Home prices remain high. According to real estate brokerage Redfin, as of last June, a household needed an annual income of $109,796 to buy a median-priced home while keeping housing costs within 30 percent of income.

That figure is $22,197 above the actual US median household income of $87,599 — meaning the typical American family cannot afford even an average-priced home.

The income required to afford a home has risen sharply compared with the pre-pandemic era. According to a report this year from Harvard University's Joint Center for Housing Studies, the annual income needed to afford a median-priced home nearly doubled, from about $66,000 in 2020 to more than $120,000 last year.

Over the same period, the monthly mortgage payment on a median-priced home jumped from roughly $1,700 to $3,100 — a 1.8-fold increase. Rising home prices combined with soaring interest rates have made it nearly impossible for income growth alone to keep pace with the cost of buying a home.

The problem is that even if prices ease in some markets, the burden of buying a home is unlikely to fall quickly. High mortgage rates keep monthly payments elevated, and existing homeowners are reluctant to list their properties for sale.

The Financial Times on Friday identified the so-called "rate lock-in effect" as a structural problem gripping the US housing market.

Homeowners who locked in fixed rates of 2 to 3 percent during the COVID-19 pandemic would face rates above 7 percent on any new mortgage if they sold and moved. Even when there are good reasons to relocate — a better job in another city, or children who have grown up and left — staying put is the more rational financial choice.

The result is that existing owners are holding back their listings, creating a market where transaction volumes fall but prices refuse to come down.

According to the FT, existing home sales in the United States have settled at an annual pace of about 4 million units — a level comparable to the period immediately after the 2008 global financial crisis.

The housing market slowdown is hitting young, first-time buyers especially hard.

According to the National Association of Realtors, the median age of first-time homebuyers hit a record high of 40 last year. Redfin, in a separate survey, put the figure at 35. The methodologies differ, but both point to the same conclusion: young people are finding it harder to break into the housing market.

An analysis released Monday by the Urban Institute found that home purchases by Americans between the ages of 18 and 45 fell more than 26 percent in 2024 compared with 2021.

The financial profile of young buyers who do manage to purchase is also shifting. The share of young buyers who put down 20 percent or more rose from 23.9 percent in 2018 to 27.4 percent in 2024, while the share who bought with all cash climbed from 7.7 percent to 10.2 percent over the same period.

Meanwhile, the share of young buyers earning 80 percent or less of the local median income fell from 33.7 percent to 28.9 percent.

Fewer young people can afford to buy at all, and those who do are increasingly drawn from wealthier, asset-rich households. The market is hardening into one where only those with substantial cash can participate.

Financial help from parents has emerged as a key factor in homeownership. According to Redfin, 19.6 percent of millennials and 14.8 percent of Generation Z buyers who recently purchased a home received cash gifts from family members to cover their down payments.

The widening gap between homeowners and non-owners is feeding what analysts describe as an intergenerational wealth divide. Households that already own property are benefiting from the combination of historically low locked-in rates and rising home values, while young renters face high prices and high borrowing costs simultaneously.

The FT said the rigidity of the housing market could drag on the broader US economy. When high mortgage rates make moving financially painful, workers become less mobile across regions, and the consumer spending and economic activity that typically accompany home sales dry up.

The deteriorating affordability is also a political liability for the Donald Trump administration ahead of the midterm elections. Trump has pursued measures including restrictions on institutional investors buying single-family homes, but with long-term rates rising and housing supply still constrained, bringing down the cost of homeownership in the near term remains a formidable challenge.

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