The Housing Gap: Why Rising Incomes Aren’t Enough to Buy a Home in the US

A Persistent Affordability Crisis

For many Americans, the path to homeownership has become increasingly difficult, even as household incomes show signs of growth. Recent data from the US Census and Realtor.com indicates that while nearly every state saw an increase in household earnings between 2024 and 2025, these gains have failed to keep pace with the realities of the housing market. Across the nation, the median household income remains insufficient to cover the costs associated with purchasing a typical home in any state.

The Impact of Mortgage Rates

Hannah Jones, a senior economist at Realtor.com, points to the broader economic environment as a primary driver of this trend. While softening home prices and rising wages might suggest improved affordability, those benefits are being effectively neutralized by the cost of borrowing. According to Jones, mortgage rates are currently more than one percentage point higher than they were a year ago, which significantly restricts buyer budgets and offsets any potential gains in purchasing power.

As of September 2026, the national median listing price for a home stood at $419,250. When factoring in a 10% down payment and a mortgage rate of 7.32%, the national median household income of $84,780 falls short by $31,136 of what is required to comfortably afford such a property.

Regional Disparities in Income Requirements

The financial hurdle varies drastically depending on the location. In some states, the gap is relatively narrow, while in others, it reaches nearly six figures. Even states that experienced robust income growth, such as Rhode Island—which saw a 9.02% increase—and Virginia, with a 7.85% jump, still require prospective buyers to earn tens of thousands of dollars more than the current median to enter the market.

At the lower end of the spectrum, Iowa residents face the smallest gap, needing an additional $2,287 in annual household income to afford a median-priced home. Illinois and Ohio follow, requiring an additional $3,168 and $3,718, respectively. These states represent the most accessible markets, though they still fall short of the necessary threshold for the typical earner.

High-Cost States and the Widening Gap

The situation is far more challenging in other parts of the country. In states like Montana, California, and Hawaii, the disparity between median income and the required earnings to purchase a home is stark. Montana leads the list with a requirement of $98,469 in additional income, followed closely by California at $98,292 and Hawaii at $97,498. Massachusetts also presents a significant barrier, with a shortfall of $90,940.

These figures highlight a systemic issue where the cost of housing has outstripped wage growth, regardless of the state’s economic performance. Whether in the Midwest or along the coasts, the data suggests that without a shift in mortgage rates or a significant adjustment in home prices, the affordability gap will continue to challenge potential homeowners across the United States.

Source: businessinsider.com