Quarterly Analysis: Income Required to Buy a Home

Slightly firmer mortgage rates and somewhat lower seasonal home prices in the fourth quarter created modest improvements in home affordability in about half of the nation's top 50 metropolitan housing markets.

February 12, 2025 - HSH.com, a trusted online resource for mortgage data, content and expertise updated its analysis of the income required to afford a median-priced home in the top 50 metropolitan areas for the fourth quarter of 2024. The review utilizes the latest quarterly existing home price data from the National Association of Realtors (NAR), incorporates local property tax and homeowner’s insurance costs, and calculates the income needed to buy a median-priced home in each market.

Compareed to one year ago, the fourth quarter of 2024 saw an improvement in relative home affordability in 25 of the nation's 50 most populated metropolitan areas. Mortgage rates firmed slightly during the period but home prices eased in their typical seasonal fashion, lowering the income needed to purchase a median-priced home in half of the markets tracked by HSH. In comparing only the quarter-to-quarter change, the income needed to purchase a median-priced home was lower in 24 of 50 areas.

Compared to the third quarter of 2024, typical seasonal cooling saw median home prices lower in 40 metro areas. eight more than was seen in the third quarter. Twenty-three markets posted second consecutive quarterly declines. In the 10 areas where prices increased, gains were mostly minimal, with no metro posting a gain of even as high as 1.5%.from the third quarter.

Mortgage rates were slightly firmer during the fourth quarter than in the third. The 6.63% quarterly average for a conforming 30-year FRM was 12 basis points (0.12%) higher than the third quarter but 67 basis points below the same period one year ago. For the two markets where a "jumbo" mortgage to finance a median-priced home even after a 20% down payment, the average rate was 7.02% in the fourth quarter, 14 basis points higher than in the third quarter (but 0.60% below 4Q23).

Lower mortgage rates and lower home prices are a key to improving affordability, but it's unlikely to be a path of regular or consistent improvement for either component. Increasing supplies of homes to buy should help sales to modestly improve while tempering price increases, but incomes still need time to rise and catch up to (let alone overcome) the extraordinary decline in home affordability over the last few years.

In the current "national" calculation, buying a $410,100 median home price with a 20% down payment ($328,080 loan amount) using a 30-year mortgage with a rate of 6.63% requires an annual income of $108,366.74 to qualify once typical tax and insurance costs are included. This is $997.93 lower than in the fourth quarter of last year, and just $374.07 lower compared to the second quarter. While affordability improved both instances, the estimated national median family income still falls below this level, so affordability remains out of balance despite the improvement.

The most and least affordable metro areas in the income-required analysis (assuming a 20% down payment):

Salary calculations using a 10% downpayment and including PMI are also provided for each of the 50 metro areas.

Some takeaways from the updated analysis:

• The fourth quarter of 2024 saw a modest increase in home affordability compared to the second. Just under half top 50 metro housing markets saw homebuyers need less income to buy a median-priced home, and twenty-five metro areas saw improved affordability compared to the same period a year ago.

• Home prices moved down in 40 of the top 50 housing markets. Home prices often complete their typical seasonal declines during the fourth quarter of each year. Of the 10 metro areas that saw home price increases, the vast majority were modest, with no market posting even as much a 1.5% increase.

• Incomes require to buy a home were split during the period. Twenty-four metro areas saw homebuyers need less income to purchase a median- priced home compared to the third quarter of 2024. Referenced against a year-ago time frame, half of the top metro housing markets required less income to buy a home, with standout decreases of 4.92% seen in the Tampa FL metro area, 5.5% in the Denver CO region and 6.2% less in the Raleigh, NC metro area. Conversely, strong increases in the income needed to purchase a median-priced home were seen in the Detroit MI metro (+4.18%), the Cleveland, OH market (+6.91%) and the St. Louis MO region (+3.37%).

• Mortgage rates were slightly firmer in the fourth quarter. In the fourth quarter of 2024, the average 30-year fixed-rate mortgage used in HSH's calculation was 12 basis points (0.12%) higher than in the third quarter, averaging 6.63% for the three months ended December.

• Still-high home prices mean a greater need for borrowers to save. Even if home prices aren't rising much or everywhere, potential buyers still need significant savings to hit a desired level of down payment. A 20% down payment on a nationally median-priced home of $410,100 requires $82,020 in cash, and a potential buyer will still need thousands of dollars more for closing costs and any required reserves. Since HSH's calculations work from a given home price, a borrower who puts only 10% down ($41,010) will face both a larger mortgage amount and costs for Private Mortgage Insurance -- lifting the income needed to buy the home by $16,268.81

• Supplies of homes to buy continue improve. At the average rate of sale during the period, the National Association of Realtors estimated that there were about 3.8 months of supply of homes available on average in the fourth quarter of 2024, down from about 4.2 months of supply in the third quarter. However, they are rather above 4Q23's 3.4 months of supply. Inventories of homes to but typically are at their leanest in the fourth quarter and to start the first quarter.

  These items and other observations are discussed in greater detail in the “Latest Analysis” component of the report.

  Potential homebuyers are encouraged to see how much home they can afford to buy using HSH's Home Affordability Calculator.

  With affordability still waning, potential homebuyers of more modest means looking to buy homes may struggle to come up with a down payment and closing costs, particularly in heated markets. Help making the jump to homeownership is often available but is tricky to find if you don't know where to look. To help potential homebuyers, HSH offers its database of Homebuyer Assistance Programs by state, where information about these valuable programs, vital website addresses, contact info and more can be found.

  Find the lists here for the 25 most expensive and 25 least expensive metropolitan areas with display maps for each list.

  Since 1979, HSH.com has been a trusted mortgage resource for consumers seeking independent, objective and expert-level information, forecasts and data. HSH.com offers unique analysis, calculators, tools and content to help demystify first mortgages, home equity loans and lines of credit, reverse mortgages and more. HSH.com empowers homebuyers and homeowners to fully understand their home financing choices and provide opportunities for them to engage with partners to execute their transactions. Keith Gumbinger, mortgage expert and vice president of HSH.com, is available for interviews at your request.

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