Most Americans Can Afford a New Home

Based on data from online real estate marketplace Zillow, a worker earning a modest salary could afford the typical newly built house—at least in theory.

Zillow’s data shows that 58.3 percent of U.S. households, or 68.8 million total households, earn enough money to buy a home without exceeding the 43 percent debt-to-income ratio rules that lenders stipulate for conventional loans. In this case, a person who earns $45,360 per year has the means to afford a home priced at $303,000, assuming a 10 percent down payment and a 30-year, fixed-rate mortgage at a 4.5 percent interest rate. This is good news for prospective buyers who want newly built homes, which continue to rise in price due to high demand and national shortages of labor and building materials. The median price of a new home sold in July was $313,700, according to the U.S. Census Bureau.

Of course, buyers approaching the 43 percent debt-to-income ratio would be living on a tight budget. Renters and homeowners are considered cost-burdened if they spend 30 percent or more of their income on housing. 

Zillow found that 83 million households, or 70.2 percent of all households, earn enough money each year ($32,400) to qualify to buy a median-value home, which was $200,700 as of July, assuming the same debt-to-income, down payment, and mortgage requirements. 

Without exceeding the 43 percent debt-to-income ratio, households would need to earn $57,700 to qualify for a home priced at $400,000, $70,500 for a home priced at $500,000, and $83,400 for a home priced at $600,000.