Affordability Gap Between Homeownership and Renting Continues to Grow

On Thursday, Redfin reported that Americans need to earn $116,633 per year to afford the median-price home for sale, 81.8% more than the $64,160 needed to afford the typical apartment for rent.

According to Redfin, someone needed to earn $110,808 to afford the typical US home for sale last year—73.1% more than the $64,000 required to afford the typical rental. Two years earlier, that income gap was smaller: buyers needed $101,341 to afford a home, 54.5% more than the $65,600 needed for rent. In 2021, the difference was just 17.3%, with $63,925 needed to buy versus $54,520 to rent. Redfin defines a home as affordable if a buyer spends no more than 30% of their income on monthly housing costs.

Homebuying costs have been rising much faster than rents, widening the income gap between owning and renting. In February, the median home-sale price rose 4.5% year-over-year to $423,892 and has been climbing at a similar pace for months. At the same time, the average 30-year fixed mortgage rate remains above 6.5%, more than twice the pandemic-era low. By comparison, the typical US household earns about $86,382—roughly $30,000 short of what’s needed to afford the typical home.

Rental costs, in contrast, have remained relatively stable. The median asking rent rose just 0.2% year-over-year in February to $1,604. Rents have been held in check by a wave of new apartment construction that has expanded supply and limited landlords’ ability to raise prices. The for-sale market remains tighter, with limited inventory—partly due to homeowners holding onto low mortgage rates—driving up competition and pushing prices higher.

Commenting on the report, Redfin Senior Economist Elijah de la Campa said:

“It has become increasingly challenging for American renters to make the shift to homeownership thanks to the triple whammy of rising home prices, high mortgage rates and a shortage of houses for sale. The gap between what someone must earn to buy versus rent may shrink in the coming months, but only because rents are expected to rise as the number of new apartments hitting the market tapers off due to a construction slowdown.”