Lower mortgage rates and gradual increases in household incomes are improving home affordability in 37 of America’s 50 most populous metropolitan areas. But in expensive coastal markets, most households still earn only about half the income needed to buy a typical home.
After a painful period of grappling with high home ownership costs, buyers are finally beginning to feel some relief.
With mortgage rates falling and home price growth slowing, Americans now need 4% less annual income to buy a typical U.S. home than they did a year ago, according to Redfin.
As of December 2025 data, Americans need an annual income of at least $111,252 to sell a typical home, compared to $115,870 a year ago.
The annual income required for Americans to own a home has been falling gradually since November, but it had previously increased on an annual income basis almost every month for the past five years in response to the coronavirus pandemic boom.
A home is considered affordable if a buyer with a mortgage spends 30% or less of their income on monthly home payments. Redfin calculated affordability based on the median home sales price, mortgage interest rate, and property tax payments.
Prices are rising in 37 of America’s 50 most populous metropolises, with Dallas, Texas, seeing the biggest increase (annual income required to buy a home fell 7.4% to $112,175). Sacramento, California (down 6.8% to $148,102); and Jacksonville, Florida (down 5.9% to $97,898).
Mortgage interest rates are currently around 6.1%, down from 7% a year ago, and monthly housing costs are also falling. At this rate, with a median home sales price of $426,747, the median monthly mortgage payment is about $2,675 down from about $2,800 at the same time last year.
With sellers far outnumbering buyers in most markets, homebuyers are also getting the biggest discounts in 13 years, Redfin reported.
Chen Zhao
“The home price crisis is showing signs of easing as costs have fallen slightly but meaningfully, paving the way for more Americans to take the plunge into homeownership,” Chen Zhao, head of economic research at Redfin, said in the company’s report. “While housing prices remain historically high, the trajectory is finally beginning to reverse, with the door to homebuying slowly opening wider rather than closing. But while affordability is improving, Americans are still contending with other obstacles on the path to homebuying, such as layoffs and nervousness about economic uncertainty.”
Even with increased affordability, homeownership remains out of reach for many Americans, Redfin noted. The typical American household earns an annual salary of only about $86,185, which is $25,000 less than the salary needed to buy a median-priced home in this country. However, median household income is expected to improve again this year, increasing by 4% from 2024 to 2025.
Although affordability has improved in many metropolitan areas, owning a home in Detroit, Michigan has become more expensive this year, with buyers now needing an income of $74,912 to afford a median-priced home, an increase of 3.6% from a year ago. Chicago, Illinois (required income increased 3.5% to $105,440); St. Louis, Missouri (up 3% to $73,984); Buffalo, N.Y. (up 2.7% to $79,919); Cincinnati, Ohio (up 1.7% to $81,487) also became less affordable for homebuyers this year.
Affordability issues remain most prevalent in coastal markets, especially California. To afford a median-priced home, homebuyers living in San Jose need to earn $374,241, the highest annual income in the country. Meanwhile, in San Francisco, buyers need to make $291,256. in Los Angeles, $248,307; in San Diego, $231,151; In New York City, a household needs to earn $196,544 a year to afford a median-priced home.
But the typical household in all five of these most expensive markets earns only about half of the income needed to buy a home.
Congress is also working to address Americans’ housing cost concerns through new legislation. The House of Representatives on Monday passed the 21st Century Housing Act, a bill that aims to improve affordability through overhauling zoning, financing and regulations. It then goes to the Senate for approval. Meanwhile, the Senate is also proposing its own housing affordability bill, the ROAD to Housing Act.
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