Housing Affordability Crisis 2025: How Much Income Do You REALLY Need?
57% of American households can't afford a $300,000 home. The median income is $84,000 but you need $120,000+ to buy the median home. There's a 7.1 million affordable homes shortage. Here's the brutal truth about housing affordability in 2025 - and what you can do about it.
💰 Calculate: Can YOU Afford to Buy in 2025?
Enter your income and see what you can REALLY afford. Get personalized strategies to overcome the affordability crisis.
Calculate My Buying Power →📊 The Brutal Numbers (2025)
Median Home Price
$440,004
Up 5.2% from 2024
Income Needed (28% Rule)
$120,000
To afford median home
Median Household Income
$84,000
$36K SHORT of what's needed!
Households Priced Out
57%
76.4 million households
🚨 THE CRISIS IN ONE SENTENCE
The median American household makes $84,000 but needs $120,000 to afford the median home - a $36,000 gap that's locking out 57% of families from homeownership.
💵 How Much Income You Need (By Home Price)
Here's the income you need to afford different home prices in 2025 (using 28% rule + 6.19% rate):
| Home Price | Down Payment (10%) | Monthly Payment | Income Needed | % of Americans |
|---|---|---|---|---|
| $200,000 | $20,000 | $1,470 | $62,571 | 70% can afford |
| $260,508 | $26,051 | $1,915 | $81,500 | 52% can afford |
| $300,000 | $30,000 | $2,204 | $93,857 | 43% can afford |
| $440,004 | $44,000 | $3,232 | $137,657 | 25% can afford |
| $500,000 | $50,000 | $3,673 | $156,429 | 18% can afford |
| $600,000 | $60,000 | $4,408 | $187,714 | 12% can afford |
💡 KEY INSIGHT
The "starter home" price ($260,508) requires $81,500 income - just below the median $84K. But only 52% of households make this much. The other 48% are completely priced out of even starter homes!
🏚️ The 7.1 Million Home Shortage
America has a 7.1 million affordable homes shortage - the worst housing crisis since the Great Depression. Here's why:
1️⃣ Not Enough Homes Being Built
Homes Needed Annually
1.5 million
Homes Built in 2024
1.1 million
We're building 400,000 fewer homes per year than needed. At this rate, the shortage will hit 10 million by 2030.
2️⃣ Existing Homes Locked Up (Lock-In Effect)
80% of homeowners have rates under 5% and refuse to sell. This removes 1.5 million homes from the market that would normally be for sale.
Normal Inventory vs Today
- • 2019 (normal): 2.2 million homes for sale
- • 2025 (today): 1.1 million homes for sale
- • Shortage: 1.1 million homes (-50%!)
3️⃣ Investors Buying Up Starter Homes
29% of home purchases are all-cash (mostly investors). They're buying starter homes and converting them to rentals, pricing out first-time buyers.
Investor Impact
- • Investors bought: 400,000 homes in 2024
- • Average price: $250,000-$350,000 (starter homes)
- • Converted to rentals: 85%
- • First-time buyers priced out: Millions
4️⃣ Zoning Laws Block New Construction
75% of residential land in major cities is zoned for single-family homes only. This blocks apartments, townhomes, and affordable housing.
Example: San Francisco
- • Population: 815,000
- • New homes approved 2024: 3,200
- • Homes needed annually: 15,000
- • Result: Median price $1.2M (unaffordable for 95%)
💪 What YOU Can Do (7 Strategies)
The crisis is real, but here are 7 strategies to overcome it:
1️⃣ Buy a Starter Home (Not Your Dream Home)
Median home ($440K) requires $138K income. Starter home ($261K) requires $82K. Buy the starter, build equity, upgrade in 5-7 years when you have more income and equity.
2️⃣ Use Down Payment Assistance (Get $25K-$100K FREE)
2,624 programs available! Average assistance: $18,500. This can drop your required income by $15K-$20K. Search programs by ZIP code.
3️⃣ Consider FHA Loans (3.5% Down, 580 Credit OK)
FHA requires only $9,100 down on a $260K starter home (vs $26K with conventional). Rate is 5.74% (lower than conventional 6.19%). Perfect for first-timers with limited savings.
4️⃣ Move to a More Affordable Market
Median home in SF: $1.2M (need $350K income). Median in Pittsburgh: $220K (need $65K income). Remote work makes this possible for many.
5️⃣ Buy with a Co-Borrower (Partner, Family, Friend)
Two $60K incomes = $120K combined. Can now afford $440K median home. Many millennials are buying with friends or siblings.
6️⃣ Wait for Rates to Drop (If You Can)
At 5.50% rates (likely mid-2026), required income drops $10K-$15K. If you can wait 6-12 months, you'll have more buying power.
7️⃣ Increase Your Income (Side Hustle, Promotion, Career Change)
Harsh truth: The affordability gap is $36K. You need to either (1) increase income, (2) buy cheaper, or (3) wait. Focus on what you CAN control - your income.
🎯 Calculate What YOU Can Afford
Enter your income and get personalized strategies: starter homes in your budget, down payment assistance, FHA options, and more.
Calculate My Buying Power →❓ Frequently Asked Questions
Will housing ever become affordable again?
Unlikely to return to 2019 affordability levels. But rates dropping to 5-5.5% (likely 2026) will help. Also, more construction + zoning reform could add supply. Best strategy: Buy what you can afford NOW, build equity, upgrade later.
Should I wait for a housing crash?
Most experts say NO crash coming. We have 7.1M home shortage (not surplus like 2008). Prices may flatten but unlikely to drop significantly. Waiting = paying rent + missing equity gains. Better to buy small now than wait for crash that may never come.
How much income do I need to afford a $300K home?
$93,857 using the 28% rule (housing costs ≤ 28% of gross income). This assumes 10% down ($30K), 6.19% rate, $2,204/month payment. With FHA (3.5% down), you need slightly less: $88,000 income.
What if I make $60K - can I EVER buy a home?
Yes! You can afford up to $200K home ($1,470/month). Look for: (1) Starter homes in affordable markets, (2) Down payment assistance ($15K-$25K), (3) FHA loans (3.5% down), (4) Co-borrower to combine incomes. Many people at $60K successfully buy with these strategies.
Why are starter homes so expensive now?
Three reasons: (1) Investors buying them as rentals (29% cash buyers), (2) Not enough being built (zoning laws), (3) Existing owners locked in with low rates (won't sell). Starter homes used to be $150K-$200K, now $250K-$300K.
Is it better to rent or buy in 2025?
Depends on your market and timeline. If buying costs less than 30% more than renting AND you'll stay 5+ years = buy. If buying costs 50%+ more than renting = rent and save. Use a rent vs buy calculator with YOUR numbers. Get personalized analysis.
What income do I need for a $500K home?
$156,429 using 28% rule. Only 18% of Americans make this much. If you're in this bracket, you have MUCH more flexibility. Can afford median home in most markets except SF, NYC, LA.
Will the government do anything to fix the affordability crisis?
Proposals include: (1) $25K first-time buyer tax credit (pending), (2) Zoning reform incentives, (3) Builder tax credits. But these take years to implement. Don't wait for government - use available programs NOW (down payment assistance, FHA, etc.).
🎯 Find Out What YOU Can Afford
Get personalized buying power calculation + strategies to overcome the affordability crisis. Free, 3-minute analysis.
Calculate My Buying Power →Trusted by 500,000+ homebuyers | Free, no obligation