Five years ago, a median-income household could afford a typical U.S. home. Today, they’re more than $17,000 short, even if they have $73,000 saved for a down payment, a new Zillow analysis finds. In Phoenix, things are even worse. Phoenix home buyers need a $22,500 raise to afford a home.

While the housing market is friendlier to buyers this spring, with more homes for sale and a record number of sellers cutting their list prices, incredible home value growth and higher mortgage rates in recent years have reset the financial bar for homeownership. Affordability pressures have helped chill buyer demand, while amping up interest in single-family rentals.

“Affordability remains a steep hill to climb, especially for first-time buyers,” said Kara Ng, senior economist at Zillow. “While the financial bar has gotten higher, we’re also in the middle of the most buyer-friendly spring since before the pandemic for those who can make the finances work. Inventory is up, prices are softening, and sellers are negotiating. To make homeownership more broadly accessible, though, we need lasting solutions, starting with policies that allow more homes to be built in the right places.”

To comfortably afford a typical U.S. home worth $367,969, a buyer today needs to make nearly $100,000 a year, assuming they have $73,594 saved for a 20% down payment.^[1] That means a household making the median income would need a $17,670 raise.^[2] If that same household only has enough savings for a 10% down payment, they’d require a pay increase of $36,287.

Median earners would need six-figure raises in four major metro areas, all of which are in California. Even with a whopping $330,000 saved for a 20% down payment, a median-income household in San Jose would need a raise of more than $250,000 to afford the typical home. Median-income households would also need six-figure raises in San Francisco ($165,566), Los Angeles ($149,375) and San Diego ($128,954).

There are 11 major markets where the median income is enough to afford the typical mortgage payment, down from 39 such markets five years ago. These are generally midsize markets in the Midwest and Northeast. Median earners in Cleveland have the most room to spare, making $11,588 more than what’s needed to afford the typical home, followed by Pittsburgh ($11,244), St. Louis ($4,897) and Cincinnati ($4,396).

As affordability headwinds have stiffened for would-be first-time buyers, renters are aging and demand for single-family rentals has been rising. These homes now rent for 41% more than five years ago, compared to 30% growth for multifamily units.

To make the finances work, buyers are looking under every rock to come up with a down payment. More than half of buyers tap at least two sources. The most common sources of down payment funding are savings (72% of buyers), the sale of a previous home (46%) and a gift or loan from family or friends (38%). Home listings on Zillow include a down payment assistance module to help shoppers see what local resources may be available to them.

*Table ordered by market size

– more at azbigmedia.com