The housing market is so unaffordable that buyers need to make nearly $115K to afford the average home, Redfin says—that’s $40k more than average earnings

Maybe you didn’t know just how unaffordable the housing market has gotten. Americans now need to earn more than six figures in order to purchase a median-priced home, according to calculations in a new Redfin report. That’s a lot more than the average American makes, to say the least.

A prospective homebuyer needs to make $114,627 to afford a home, the brokerage and real-estate research firm says. That’s a 15% year-over-year increase and the highest annual income on record to buy a home. This is a problem considering that median household income was $74,580 in 2022—about $40,000 shy of what’s needed to meet Redfin's target. (Redfin’s reporting takes into account income, average monthly mortgage payments, and current mortgage rates.)

And this doesn’t even consider regional variation, or famously expensive markets such as New York City. Just to rent an apartment in Gotham, most landlords will require that your annual income equals at least 40 to 45 times the monthly rent.

"While the income needed to purchase a median-priced home in the U.S. is higher than the average income of most American households, it is now more expensive to rent homes and apartments in most markets,” Maureen McDermut, a realtor with Sotheby's International-Montecito, tells Fortune. “New York City, Chicago, and Los Angeles have all seen dramatic increases in the price to rent a home.” (McDermut started her 20-year career selling commercial real estate in Los Angeles.)

Plus, “the reality is that renting will usually cost more in the long run, as it comes with the opportunity cost of not building equity or wealth,” McDermut says.

'Renters and buyers alike are affected'

It has to do with the difference between how your salary looks (in most cases pretax) and how you need to come up with cold hard cash in the rental market. For instance, back in December 2020, prospective NYC renters needed to earn more than $10,000 (pretax) each month to meet the $3,100 median rent at the time. Fast forward to today, however, and average monthly rent in Manhattan hit an all-time high this summer at $4,400—meaning that renters would need to make a whopping $176,000 per year (pretax) to even be eligible to rent.

“This trajectory, while concurrent with what we've observed in the realm of homeownership, accentuates a broader theme: escalating housing costs,” John Walkup, co-founder of NYC real estate analytics company UrbanDigs, tells Fortune. “The fact that rental costs have followed a similar upward trend as home prices underscores that renters and buyers alike are affected.”

It’s important to consider, of course, that places like NYC are an extreme example of rent prices. When looking generally at buying versus renting from a monthly payment perspective, “renting is more affordable than borrowing to buy a home in most metro areas,” Daryl Fairweather, Redfin’s chief economist, tells Fortune. In fact, there are only four major markets, as defined by Redfin, where it’s cheaper to buy than to rent: Detroit, Philadelphia, Cleveland and Houston.

The strain on housing affordability is largely driven by mortgage rates, which just hit 8% on Wednesday, and rising home prices, which have increased 5% year-to-date.

Indeed, housing affordability is the worst it's been this century, with mortgage rates exceeding 7% and home prices that are up 5% year-to-date. Monthly mortgage payments reached an all-time high of more than $2,800 per month, Redfin data shows.

But one-fourth of homeowners were paying more than $3,000 per month as of July, leaving many of them house-poor. Meanwhile, average U.S. monthly earnings in July 2023 were just $4,600, according to economic data firm CEIC. That means some homeowners could be spending more than 60% of their paychecks on their mortgage—much higher than what is considered affordable. A monthly mortgage payment is considered affordable if the homebuyer “spends no more than 30% of their income on housing,” Fairweather says.

“In a homebuyer’s ideal world, rising mortgage rates would push demand and home prices down enough to make up for high interest payments. But that’s not what’s happening now,” Chen Zhao, Redfin economics research lead, said in a statement. “Although new listings are ticking up slightly, inventory is still near record lows as homeowners hang onto their low mortgage rates—and that’s propping up prices.”

This story was originally featured on Fortune.com