The New Income Needed To Afford A Home, According To Millennials And Gen Z
Written by
Dawn Allcot
Edited by
Angela Corry
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Many millennials and Gen Zers would agree they have it harder financially than past generations. This is especially true when it comes to buying their first home. Nearly 19% of young adults, ages 18 to 24, said they believe you need a salary of at least $200,000 or more to purchase a home, which is the largest percentage of respondents who feel this way, based on a new GOBankingRates survey.
“My generation has really been left to struggle in a changing world with outdated ideas and financial expectations,” said Armine Alajian, founder and CPA at Alajian Group Inc. One myth, Alajian pointed out, is that if you buy a house it will be paid off by the time you retire.
“The reality is the world just doesn’t work like that anymore.”
The Reality of Housing Costs for Gen Z and Millennials
In a recent GOBankingRates survey, 16% of Gen Z ages 18 to 24 years old and millennials ranging in age from 35 to 44 said they believe you could buy a home with less than $50,000 in annual income. Only 10% of those ranging in age from 25 to 34 believe you can afford a home on a salary of less than $50,000 per year.
Roughly one in five young adults aged 25 to 34 believe you need $75,000 to $100,000 to afford a home. Likewise, one in five Gen Xers said you need between $75,000 and $100,000. One-quarter of Gen Xers said you can afford a home comfortably on less than $75,000.
It turns out, according to MortgageResearch.com, younger millennials and Gen X were not far off in their estimates. The Mortgage Research Center ran the calculations to reveal that you need at least $80,000 to afford a $300,000 house. However, in September 2024, the median sale price for homes across the U.S. was $427,496. That means even a low six-figure salary may leave prospective homebuyers falling short of what they need to secure a mortgage, depending on where they live and the size home they’re hoping to purchase.
The Mortgage Research Center’s study revealed that the required income to buy a $400,000 house is $108,000. If you can find one, you may be able to afford a $200,000 home on less than $54,000 per year annual salary.
What Do the Boomers Think?
Meanwhile, 14% of baby boomers age 65+ believe you need more than $200,000, while a mere 6% believe you can buy a home with an annual salary of less than $50,000. Nearly 18% believe you need between $75,000 and $100,000, while 17% believe you need between $100,001 and $125,000, the largest percentage of any generation to feel this way.
“I think most boomers have been educated on the buying process so they know what is needed to secure a home and how you can get approved for a mortgage,” said Kori Sassoweer, principal agent at The Kori Sassower Team, a real estate firm serving Westchester County, New York and Fairfield County, Connecticut.
For those who believe they can buy a home on an income of less than $50,000 however, Sassower speculated, “They may think home prices are lower than they currently are or they are looking to dramatically downsize their current living.”
Hope for Younger Generations
Even if your salary doesn’t meet the minimum for the home of your dreams, there’s still hope, according to Sassower. “Be open to a starter home or townhouse as you learn to be a homeowner and plan in five years to upgrade as your salary increases,” she said.
There are also other ways to spend less on a house. “They may need to buy a home further from a city, on a busier road, that needs updates. These are all homes that may go for a lower purchase price than the renovated, move-in ready home on a cul-de-sac close to the train,” she said. “A less desirable location and layout can get you a nicer home.”
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