The ever-increasing price of new homes in the U.S., paired with the sky-high mortgage rates, has led many aspiring homeowners to wonder if they will be able to buy a house in 2024.
Unfortunately. the average income required in order to afford an average house only appears to be increasing, according to the latest information published by Redfin.
As of August 2023, the average U.S. house costs approximately $420,000 – only about $12,000 less than during the 2020 highs. This means that the average annual income of anyone desiring to buy a new house in the United States needs to be at least $114,627.
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The number – 15% higher than a year before and around 50% higher than before the COVID-19 pandemic – is fairly alarming, considering that the average income growth over the previous year has been approximately 5%.
The minimum required income is also approximately 40% higher than the average household income in the U.S. and nearly twice as high as the average salary in the country, which stands just shy of $60,000, per Forbes.
Are U.S. homes going to become more affordable in 2024?
While very high mortgage rates are a major contributing factor when it comes to the rising costs associated with buying a house, they have also had a positive effect in limiting the price of homes for sale.
Indeed, recent weeks have shown a reversal in the trend, and throughout October, the average price of U.S. homes has decreased by approximately 7%, according to a Fortune report from November 6.
Still, while certain experts, including Robert Kiyosaki, the author of “Rich Dad Poor Dad,” believe that the housing market is nearing a crash, things remain far from certain, and the costs of acquiring an average U.S. house remain extremely high with no guarantees they will come down in the foreseeable future.
Is it possible to invest in a house with less than $115,000 per year?
Despite the extremely high costs, it is still possible both to invest in the housing market and to buy a house with an income below $115,000 per year.
Due to the role high mortgage rates are playing in driving up the costs, the most obvious way of getting a house for less is to pay with cash – and indeed, the number of people buying homes with cash has reached the highest levels seen in a decade already in early 2023.
The caveat to this approach is that if you can afford to acquire a house with cash, your income is likely already above $115,000 per year. Another option for aspiring homeowners is to relocate to a more affordable area.
According to Redfin data, if you are willing to settle down in Acron, Ohio, you’d be able to meet the costs of a new house with an income below $60,000. Philadelphia (PH), Louisville (KY), and Oklahoma City (OK) are all also relatively affordable, with income requirements ranging between $60,000 and $80,000.
Finally, considering the current high prices, you might want to explore alternatives to buying a house if you are merely looking to invest in real estate, such as House exchange-traded funds (ETFs) and real estate investment trusts (REITs).
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
