The Philly area is one of the major U.S. metros where households don’t need to make six figures to afford the typical home

Across the country, the typical household makes about $29,000 less than it needs to afford a typical home, according to an analysis by the online real estate brokerage Redfin.

Buyers taking out mortgages need to make roughly $114,000 per year if they want to buy a median-priced home and spend no more than 30% of their income, the traditional marker of housing affordability, according to a report Redfin released last week. That’s less than the record $121,000 buyers needed to purchase a typical home in October. Then, the typical household made about $40,800 less than it needed.

The Philadelphia region is one of 13 major metros where households making less than six figures can afford the median-priced home, Redfin found in its analysis of the 50 most populous U.S. metros (excluding Chicago because of insufficient data). The typical household in the Philadelphia metro area, which Redfin defined as Philadelphia and Delaware Counties, needs to make $73,182 — slightly more than the median household income of $72,933.

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The Philadelphia area has the fifth-lowest income needed out of the metros studied. The Detroit area has the lowest required income at $46,168. Buyers in the Pittsburgh metro need to make $61,603, which is 30% less than the typical household there makes.

Although the Philadelphia area remains relatively affordable, the typical household needs to make about $9,500 more than it did last year. The median price of a home sold in February in the Philadelphia metro was $255,000 — 8.5% more than at the same time last year.

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More than a decade of builders producing fewer homes than needed following the housing market collapse “is the root cause of a lot of our affordability challenges,” said Chen Zhao, head of Redfin’s economics research team. Lack of housing supply has driven up prices, which also shot up during the pandemic, when buyer preferences and moving patterns shifted.

Record-low mortgage interest rates that helped buyers afford homes early in the pandemic are long gone. Higher rates can add hundreds of dollars onto monthly housing payments, and they’ve been trending up over the last two years. The interest rate for the popular 30-year fixed-rate mortgage averaged 4.67% at this time in 2022, according to the government-backed mortgage buyer Freddie Mac. The average is 6.82% as of April 4.

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Elevated rates usually tend to make home prices fall, but the lack of supply is keeping prices up.

Housing payments have risen twice as much as incomes since 2022, according to Redfin’s analysis.

“We’re definitely in a bad spot, but we do think things will improve a little bit” over the next year or so, Zhao said.

She and other economists expect mortgage rates to drop a little this year. And Zhao pointed to more supply coming onto the market, partly because homeowners haven’t been selling. “Over time, people become more compelled to move,” she said.

» READ MORE: Philly-area home builders had a strong 2023. They’re confident about 2024.

In Redfin’s analysis, housing payments included the mortgage principal, interest, property taxes, homeowners insurance, and mortgage insurance. Redfin calculated the median monthly housing payments for homes sold in February — $1,830 in the Philadelphia area.

Redfin’s calculations assume the buyer is making a 15% down payment, because the average payment is usually between 10% and 15%. That means buyers who can’t afford to pay that amount up front would have higher monthly payments and would need to make more money to afford the median-priced home.

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Of the top 10 metros where home buyers need to make the most money, six are in California. The top spot goes to the San Francisco metro area, where buyers need to make a whopping $382,576 to afford the median-priced home. That’s more than five times as much as in the Philadelphia area.

The median income for households in the San Francisco area is $159,867 — about 40% of what the typical household would need to make. The median-priced home there was more than $1.4 million in February.

On the East Coast, New York and Boston also made the top 10 metros where buyers need to make the highest incomes — $199,325 and $187,656, respectively.

This story has been updated to include Redfin’s definition of the Philadelphia metro area.