Here's how much you need to earn to afford a home in the Seattle area

In just a few years, the income needed to afford a typical home in the Seattle area has increased by nearly 80%, showing how skyrocketing home prices and interest rate increases have combined to transform housing affordability in the region.

A Zillow analysis released Thursday found that Seattle-area homebuyers must earn nearly $214,000 a year to afford a typical home in the area, the fifth-highest required income among major cities and the highest outside of California.

The report assumes buyers will spend no more than 30% of their income on housing (a common measure of housing affordability), make a 10% down payment and lock in an interest rate of 6.6%, the average interest rate in the United States January.

To define the “typical” home, Zillow looks at the middle level of its home value index. In the Seattle area, including King, Pierce and Snohomish counties, that equates to a $698,000 home with a monthly mortgage payment of $4,450, plus about $900 per month in additional costs such as insurance and property taxes.

The increase in mortgage rates over the past 18 months has driven up the monthly cost of buying a home. At the same time, a lack of homes for sale kept real estate prices in the Seattle area from plummeting. This combination has throttled the real estate market as homebuyers struggle to get into homes.

Since 2020, “affordability has essentially halved because mortgage payments have gone up but incomes haven't kept up,” said Orphe Divounguy, senior economist at Zillow, in an interview.

According to Zillow, buyers in the Seattle area had to earn about $120,000 in 2020 to afford a typical home. Even Seattle's staggering median household income of $115,000 falls short of expectations. While the income needed to purchase a home increased 79% from January 2020 to January 2024, the area's average income only rose about 22%, according to the analysis.

Zillow's conclusion is consistent with others, such as the University of Washington's Washington Center for Real Estate Research's Housing Affordability Index. According to this index, median-income homebuyers can afford a median-priced home in only two of Washington's 39 counties, Lincoln and Columbia. The index assumes a down payment of 20% and a household only spends 25% of its gross income on mortgage payments.

How do home buyers cope with this? Many people spend more than 30% of their income on housing, said Aaron Crossley, a loan officer at Movement Mortgage in Kirkland.

Many home buyers in the Seattle area spend about 40% of their income on housing and can qualify for a mortgage with a total debt-to-income ratio of 43% to 50%, including other debt, Crossley said.

With higher mortgage rates, “you have to devote a little bit more of your gross income to housing,” Crossley said.

Some buyers rely on loans or gifts from family members to cover the down payment, although this option is out of reach for many. Black homebuyers in particular are less likely than other buyers to say they use a gift from a friend or relative to help with the down payment.

Others are teaming up with friends to afford a house or leaning toward condos, said Sharon O'Mahony, an agent with Seattle Keller Williams. And many people simply wait longer before purchasing.

Given the high prices and rates, even “dual-income couples are currently struggling to break into the areas they want to be in,” O'Mahony said. “Even without children and two incomes, it is still difficult to enter the market.”

On the other hand, buyers who are successful in the current market often have income from investments that have performed well, she said.

Since 2020, property values ​​have skyrocketed, particularly in remote areas that offer more space and affordability. For example, the value of a typical home in a zip code covering Seattle's Capitol Hill and Central District neighborhoods increased by about 8, according to Zillow zip code-level data% from 2020 to 2024, compared to 51% in a Renton ZIP code and 61% in Mill Creek.

There is little guaranteed relief on the horizon for homebuyers.

Real estate economists expect interest rates to fall somewhat this year, but not dramatically. Few homeowners are putting their properties up for sale: “They're sitting on these lower prices and then the question becomes, 'Even if I sell, where should I move?'” Divounguy said. And home builders struggle with high construction costs and other factors.

“The key to improving affordability will actually lie in the ability of builders to build more homes and help close that gap,” Divounguy said.