Americans call $74K the perfect salary — but it buys a home in only two states

According to a recent survey, Americans believe $74,000 per year leads to the ideal level of financial comfort. Though the number is above the national median income and enough to rent in most cities, it’s still a long way from bringing homeownership within reach for many people across the country.

The Housing Affordability Gap

According to Realtor. com, that $74,000 salary is high enough to make purchasing a medial-priced home affordable in only two states: West Virginia and Louisiana. In almost every other state, the monthly cost of a mortgage payment would be higher than what is typically broadly recommended: spending no more than one-third of income on housing.

Even if you doubled that to $148,000 per year, it wouldn’t be enough to ensure affordability in pricey markets like California, Hawaii, Massachusetts, Colorado and Washington state — where the median home price is more than $600,000.

The Math Behind the Struggle

The median price of a new home in the United States is now upward of $410,000 and for existing homes it is closer to $422,000, according to data compiled by the Census Bureau and NAR. With a 20% down payment and an interest rate of about 6.5%, buyers are looking at monthly mortgage payments of around $2,500 — above what a salary of roughly $74,000 can afford.

“Even with the ‘perfect salary,’ you may still not be able to afford a median-priced home in most states,” said Hannah Jones, senior economic research analyst at Realtor.com

More Than Just Mortgage Rates

Although the housing debate has largely centered on rates, currently around the mid 6% range, some experts argue price is a bigger impediment to purchasing a home.

“It’s more the home prices that are the bigger challenge,” said Michelle Griffith, a luxury real estate agent at Douglas Elliman. “Even if mortgage rates were at zero, the fact is it still takes a lot of cash to get into the market,” he added.

Competition has also remained high because of tight inventory, which has increased home values and sidelined buyers who do not have large down payments. At the same time, existing homeowners are loath to sell because they don’t want to lose out on what became historically low mortgage rates during the pandemic.

A Market Slowly Shifting

In spite of these hurdles, however, there are also small signs of progress. Mortgage rates have marched slightly lower in recent months, and home price growth has leveled off or even slightly weakened.

“What we have here in the housing market is just downward pressure on home prices from lower demand and higher supply,” said Torsten Sløk, the chief economist of Apollo Global Management.

The ways in which affordability improves will take time, but the power balance no longer leans quite as heavily toward sellers as it did during the frenzy of pandemic-era bidding wars, said Mark Fleming, chief economist at First American. The market is finally showing signs of life for buyers who have been waiting.

The Takeaway for Buyers

So, yes: $74,000 is how much money you want to be earning if you’re living comfortably in America, but it’s also an example of the disparity between what a worker earns and what housing costs. For now, affordability extends to just a handful of states, and potential buyers in most of the country will need higher incomes, more innovative lending products or a sharp reduction in home prices to make ownership possible.