Quarterly Analysis: Income Required to Buy a Home

Firmer mortgage rates and typical fading of seasonal home price declines saw home affordability diminish in a majority of the nation's 50 largest metropolitan housing markets during the first quarter of 2025.

May 9, 2025 - HSH.com, a trusted online resource for mortgage data, content and expertise updated its analysis of the income required to afford a median-priced home in the top 50 metropolitan areas for the first quarter of 2025. The review utilizes the latest quarterly existing home price data from the National Association of Realtors (NAR), incorporates local property tax and homeowner’s insurance costs, and calculates the income needed to buy a median-priced home in each market.

Compared to one year ago, the first quarter of 2025 saw diminished relative home affordability in all of the nation's 50 most populated metropolitan areas. Mortgage rates by twenty basis points (0.20%) during the fourth quarter, overcoming seasonally lower home prices in a majority of markets during the period.

Home prices typically begin their seasonal upturn during the first quarter of each year, and 2025 was no different. Relative to the fourth quarter, home prices were lower in 30 of the top 50 metro areas and unchanged in three, and price decreases in many were small enough that the increase in mortgage rates erased their benefit. Just 12 metro areas saw a lower salary needed to purchase a median priced home compared to the final stanza of 2024.

After increasing by 12 basis points in the fourth quarter of 2024, mortgage rates rose by another 20 in the first quarter of 2025, landing at 6.83% for the quarter. This was also eight basis points (0.08%) higher than was seen in the same period one year ago. At 7.04%, the "jumbo" mortgage needed to finance a median-priced home in two markets was just two basis points higher than the fourth quarter of 2024 and 12 basis points lower than year-ago levels.

Lower mortgage rates and lower home prices are a key to improving affordability, but it's unlikely to be a path of regular or consistent improvement for either component. Increasing supplies of homes to buy should help sales to modestly improve while tempering price increases to some degree, but incomes still need time to rise and catch up to (let alone overcome) the extraordinary decline in home affordability over the last few years.

In the current "national" calculation, buying a $402,300 median home price with a 20% down payment ($321,840 loan amount) using a 30-year mortgage with a rate of 6.83% requires an annual income of $108,485.65 to qualify once typical tax and insurance costs are included.

This is $4,191.10 higher than in the first quarter of last year, although just $184.80 more compared to the fourth quarter. While affordability declined in both instances, it's of little matter, since the estimated national median family income still falls below this level. As such so affordability remains out of balance.

The most and least affordable metro areas in the income-required analysis (assuming a 20% down payment):

Salary calculations using a 10% downpayment and including PMI are also provided for each of the 50 metro areas.

Some takeaways from the updated analysis:

• The first quarter of 2025 saw a decrease in home affordability across a majority of markets compared to the fourth quarter of 2024. Just twelve half top 50 metro housing markets saw homebuyers need less income to buy a median-priced home, and no metro areas saw improved affordability compared to the same period a year ago.

• Home prices moved down in 30 of the top 50 housing markets and were unchanged in three more. Home prices often complete their typical seasonal declines during the fourth quarter of each year and begin their seasonal rise in the first quarter. Most declines were small, and higher mortgage rates eroded or erased their beneficial effect.

• The incomes required to buy a home was higher in 38 markets during the period. Just twelve metro areas saw homebuyers need less income to purchase a median-priced home compared to the fourth quarter of 2024. Referenced against a year-ago time frame, the income needed to buy a median-priced existing home was higher across the board, with increases ranging from 0.15% in the San Antonio, TX metro areas to as much as 8.92% in the Cleveland, OH metro area.

• Mortgage rates were firmer in the first quarter. In the first quarter of 2025, the average 30-year fixed-rate mortgage used in HSH's calculation was 20 basis points (0.20%) higher than in the fourth quarter, averaging 6.83% for the three months ended March.

• Still-high home prices mean a greater need for borrowers to save. Home prices starting their annual upcycle will see borrowers need to save up even more to hit a desired level of down payment. A 20% down payment on a nationally median-priced home of $402,300 requires $80,460 in cash, and a potential buyer will still need thousands of dollars more for closing costs and any required reserves. Since HSH's calculations work from a given home price, a borrower who puts only 10% down ($40,230) will face both a larger mortgage amount and costs for Private Mortgage Insurance -- lifting the income needed to buy the home by $16,188.41

• Supplies of homes to buy continue to improve. At the average rate of sale during the period, the National Association of Realtors estimated that there were about 3.66 months of supply of homes available in the first quarter of 2025, about the same as the 3.7 months of supply in the fourth quarter. Last year, the supply figure for the first three months of 2024 was just 3.03 months, so there's been a meaningful increase in the number of homes for sale. As well, the monthly supply figure improved to 4 months in March, the highest level since last October, so a seasonal upswing in homes for sale is underway.

  These items and other observations are discussed in greater detail in the “Latest Analysis” component of the report.

  Potential homebuyers are encouraged to see how much home they can afford to buy using HSH's Home Affordability Calculator.

  With affordability still waning, potential homebuyers of more modest means looking to buy homes may struggle to come up with a down payment and closing costs, particularly in heated markets. Help making the jump to homeownership is often available but is tricky to find if you don't know where to look. To help potential homebuyers, HSH offers its database of Homebuyer Assistance Programs by state, where information about these valuable programs, vital website addresses, contact info and more can be found.

  Find the lists here for the 25 most expensive and 25 least expensive metropolitan areas with display maps for each list.

  Since 1979, HSH.com has been a trusted mortgage resource for consumers seeking independent, objective and expert-level information, forecasts and data. HSH.com offers unique analysis, calculators, tools and content to help demystify first mortgages, home equity loans and lines of credit, reverse mortgages and more. HSH.com empowers homebuyers and homeowners to fully understand their home financing choices and provide opportunities for them to engage with partners to execute their transactions. Keith Gumbinger, mortgage expert and vice president of HSH.com, is available for interviews at your request.

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