Let’s be optimists and call it a step in the right direction. While the income needed to buy a new home is still about $22,000 more than the typical household earns, that gap has been shrinking.

According to an analysis released Wednesday by Redfin, a year ago the gap was $26,000, and it was $29,000 two years ago.

Looking at its data through June, Redfin said homebuyers would need to earn $109,796 to afford the typical U.S. home — down from the all-time high of $110,382 a year earlier.

“The earnings needed to buy a house have stabilized after several years of deterioration, but that doesn’t mean homes are affordable to the average American,” said Redfin Senior Economist Yingqi Xu. “There’s still a double-digit gap between what the typical household earns and what they need to comfortably buy a home, leaving many prospective first-time buyers stalled on the sidelines.”

Even if the market isn’t becoming much more affordable, Xu described it as a “buyer’s market in most of the country,” pointing to regional spots like Nashville, Tenn., and Austin, Texas, which had been pandemic-era boomtowns.

“It is becoming a bit more manageable for house hunters,” Xu said.

Redfin considers a home affordable if the buyer spends no more than 30% of household income on monthly housing payments, assuming a 15% downpayment. Its economists caution that affordability could worsen “if the Fed needs to hike interest rates more than projected, oil prices jump even more than they already have, or the AI boom intensifies the recent increase in inflation.”

There is more reason for optimism when it comes to starter homes, however. Earnings need to be $70,693 to afford the typical U.S. entry-level home, down 1.5% from a year ago, with eight consecutive months of cooling.

“Affordability has improved modestly for entry-level buyers, but starter homes come with trade-offs, and finding the right one is a challenge,” Xu said, noting that first-time buyers are already stretching budgets to afford monthly mortgage payments, so they’re hesitant to take on expensive renovations.

“Move-in ready starter homes attract strong demand,” he added, “while fixer-uppers aren’t quite as desirable because the buyers who are typically in the market for an inexpensive home don’t have much financial cushion for renovations.”