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Household income over the last several years has not kept pace with housing prices. The average sales price of a house in the United States was $348,000 in Q1 of 2015. Today, the average sales price is $503,800.[1] A 30-year fixed rate mortgage averaged 3.85% in 2015. From January 1, 2025, through the 8th of May 2025, a 30-year fixed rate mortgage has averaged 6.8%.[2]
Traditionally, a 20% down payment is recommended when purchasing a home. Among several other important factors, putting 20% down eliminates the need to carry private mortgage insurance – a requirement for all conventional loans where more than 80% of the purchase is financed. In 2015, the average down payment (20%) needed was $69,600. That’s not a small amount of money. After expenses of everyday life, retirement savings, and maintenance of an adequate emergency fund, it would take the average consumer several years to accumulate this type of money. Saving 20% for a down-payment is arguably the largest hurdle a buyer faces. Over the last decade, this hurdle has grown by 45%. Down payments today (at the average) require a six-figure amount. Most people can’t stroke a $100,760 check.
Let’s break this down further. In 2015, the estimated monthly payment for an average home was $1,317.33 (assuming a 20% down payment was made, not including taxes or insurance). Today, the estimated monthly payment for an average home is $2,652.45 (assuming 20% down, not including taxes and insurance). Given a 45% increase in the price of average homes over the last 10 years and the current interest rate environment, estimated monthly payments are 101% higher than they were just a decade ago. Annualize the monthly payments…$15,807 has ballooned to $31,829. Even if interest rates on a 30-year were 3.85% like they were 10 years ago, the monthly payment on an average home today would amount to $1,907.10. That’s still $600/mo. more expensive!
Financial metrics and ratios should help guide decision making. When purchasing a house, it is typically advisable to not exceed a 28% housing ratio (monthly housing expenses (including taxes and insurance)/gross monthly income). For simplicity, I will assume $3,000 was the cost of taxes and insurance in 2015 for an average house and $4,000 is the cost of taxes and insurance for an average house today. After these additions, the gross income needed to afford an average home in 2015 was $67,171.29. Today, the gross income needed to afford an average home is $127,962.14.
In 2015, the real median household income in the United States was $71,000. 2024 and 2025 data points are not available yet for real median household income, but since 2015, household income has grown 2.06% year over year. Thus, it is reasonable to assume real median household income in 2025 is roughly $87,000. Notice anything interesting about these numbers? In 2015 it took $67,171 worth of income to responsibly afford an average home. The median household income was $71,000. This gets a green check. Today, it takes $127,962 worth of income to responsibly afford an average home. The median household income is roughly $87,000. This gets a red X.
For the younger generation, responsible homeownership is almost out of the question unless you are married and have incomes matching the mean personal income in the US ($63,510 in 2023)[3], ideally higher. If you find that you are in this group (or your children or grandchildren are in this group), nice work – you are likely ahead of most of your peers. My guess is your income probably aligns with what is recommended, but you lack a 20% down payment. Again, most folks in their 20s and 30s don’t have six figures put aside for a down payment.
I write all of this to drive home a few points – do not harm your financial future to achieve “comfort” today. Block out the noise, put your head down and grind, save your money appropriately, and be careful who you take your advice from. Most people are not financially savvy. If you are in the market for a home, talk to someone about your financial situation to ensure you can afford it. Young people can save for a down payment, enjoy life, and ultimately become homeowners…and can do so faster than they likely thought with a little discipline. My Dad reminds me all the time, “Live like no other, so you can live like no other.” If you want to discuss this in more detail, give us a call.
Be well,
Spell Carr
[1] https://fred.stlouisfed.org/series/ASPUS
[2] https://fred.stlouisfed.org/series/MORTGAGE30US
[3] https://fred.stlouisfed.org/series/MAPAINUSA646N
