Americans need a six-figure salary to afford a new home in most cities


Looking to buy a home? If so, that’s bad news from Redfin. According to the real estate company’s latest survey, home shoppers need to earn 50% more than they did before the pandemic to buy a typical American home in today’s market.

Nationally, buyers would have to earn an average of $114,627 (before taxes and inflation) to buy a median-priced U.S. home in August 2023, per Redfin. That’s 15% ($15,285) more than last year, and 50% more than the $72,511 income needed to purchase a home in August 2019. This number represents the highest annual income necessary to purchase a home ever dating back to 2012, Redfin found.

That’s a steep climb for some, considering the average American family earns about $200 $75,000 Annually in 2022. According to the Federal Reserve Bank of Atlanta, hourly wages rose slightly 5% During the past year.

The data highlights how difficult the housing market has become over the past four years, with rising home prices and mortgage rates far outstripping wage growth, leaving more and more entry-level buyers with lower prices.

Read more: How to buy a house in 2023

“Because mortgage rates were low, it became cheaper to borrow to buy a home, keeping affordability somewhat in check. Then in 2022 and 2023, mortgage rates doubled from lows of 3% to nearly 8%.This adds a lot to the cost [buying] “Home,” said Darryl Fairweather, chief economist at Redfin.

Read more: Mortgage rates at 20-year high: Is 2023 a good time to buy a home?

Did he pay too much? A homeowner tours his new home, in Washingtonville, New York (John Minchillo/AP Photo) (News agency)

Six figures or bust

People looking to buy need to earn $100,000 a year or more to afford a home in 50 of the 100 U.S. metros analyzed by Redfin, and at least $50,000 to cover costs elsewhere in the country. Metro-wide year-over-year increases in the income needed to buy a home have not been adjusted for inflation, analysts said.

In both Miami and Newark, New Jersey, homebuyers had to earn 33% more in August than a year ago to be able to afford a median-priced home – the largest percentage increase in any major US metro.

Redfin data found that homebuyers in Miami need to earn $143,000 annually to afford the area’s typical monthly mortgage payment of $3,580 over the same time frame. Buyers in Newark had to earn nearly $160,000 to afford mortgage payments averaging $3,989 per month as of August.

Buyers searching in major metropolitan areas had a more difficult time.

In San Francisco and San Jose, California, those looking to buy a home had to earn $400,000, according to Redfin; This is up approximately 24% year over year. The next five most expensive markets were all in California: In Anaheim, I needed to make $300,000 a year; Auckland $250,000; San Diego, $241,000; Los Angeles, $237,281; and Oxnard, $233,000.

In Anaheim alone, the third most expensive market among all metro areas in the study, the income required to buy a median-priced home jumped 28.6% year over year. These people were looking at a monthly payment of $7,500 for a typical $1.1 million home.

Although home prices have declined in some metro areas, the tight inventory of homes has declined Previously owned homes The market continues to support prices.

With current homeowners reluctant to part with their rock-bottom prices and move anytime soon, the National Association of Realtors expects sales of previously owned homes to decline by 20% by the end of the year.

“As the year comes to a close, we may see a further slowdown in sales,” said Jeffrey Rubin, the company’s president. WSFS MortgageYahoo Finance said. “I’ve spoken to my colleagues on the phone, and the general comment is that we’re still there — but we’re not seeing a quick rebound. We’re working through the lows and it’s still frustrating.”

Deal areas?

Home buyers in the Rust Belt have to earn less compared to other major metro areas, but still more than they did a year ago. Stretching from upstate New York to the Midwest, the Rust Belt is known as an industrial sector that once thrived on steel manufacturing and coal production.

Home prices in these areas are some of the most affordable you will encounter.

Looking to buy in Detroit? You can get a home while earning about $52,000 per year. Although this number was 19% higher than the previous year, it was also the lowest income required to purchase a home in the United States.

This was followed by three metros in Ohio (Akron, Dayton, and Cleveland), and Little Rock, Arkansas, where buyers needed to earn at least $60,000 to purchase a home.

A woman checks listings at a real estate agency.  (Image source: William West/AFP via Getty Images)

A woman checks listings at a real estate agency. (William West/AFP via Getty Images) (William West via Getty Images)

So-called pandemic boomtowns — where workers flocked remotely — were the only areas where the income needed to buy a minimal amount increased, according to Redfin. Those include Austin, Phoenix, and Boise.

In Austin, Texas, prospective buyers had to earn $126,000 annually to buy a median-priced home, just 8% more than last year – the smallest increase among all US metro cities analyzed. This happened even as home prices in Austin declined 7% On an annual basis in August.

Buyers in Boise, Idaho, needed to earn 9% more than last year ($127,000), while homebuyers in Salt Lake City, Fort Worth, Texas, and Lakeland, Florida, posted year-over-year increases of nearly 13% per year. who are they.

Read more: How much house can I afford?

“We need to increase supply.”

What will it take to reverse the high income trend? Simple: more homes on the market.

New listings rose 0.8% from the previous month in August, according to Redfin, marking the second rise after a year of declines. Overall, new listings remained down 14.4% from the previous year.

Despite the modest increase in supply, the share of homes for sale hit a record low in August, Redfin analysts said. Total homes for sale fell 1.1% from the previous month on a seasonally adjusted basis and 20.8% year over year – the largest decline since June 2021.

“New listings have likely bottomed out,” Chen Zhao, economic research leader at Redfin, said in a previous article. Stady. “Most homeowners who feel their hands are tied by high interest rates have already made the decision not to sell. This means that many sellers today are putting their homes on the market because they have to, in some cases due to divorce, family emergencies, or moving back home.” Policies the desk.”

A sign hangs in front of new condominiums for sale in Los Angeles, California.  (Image source: Mario Tama, Getty Images)

A sign has been placed in front of new condominiums for sale in Los Angeles. (Image source: Mario Tama, Getty Images) (Mario Tama via Getty Images)

Another sign of hope: new construction. According to the National Association of RealtorsNewly built single-family homes accounted for nearly a third of the nation’s housing stock as of the second quarter of 2023.

For example: In Boise alone, new homes made up nearly 40% of single-family inventory in the second quarter, according to Redfin. This has allowed builders to offer attractive incentives to buyers to boost sales – such as mortgage rate reductions, upgrades, or price drops averaging 6%.

“The only way to sustainably lower prices is to increase supply,” Fairweather said. But “it will take a long time for that to happen.”

Gabriella He is the personal finance and housing correspondent for Yahoo Finance. Follow her on Twitter @__GabrielaCruz.

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