First-time homebuyers need an annual salary of $64,500 to afford a typical starter home. That’s up from $57,300 in 2022, according to Redfin (redfin.com), the technology-powered real estate brokerage.
A person looking to buy today’s typical starter home would have a monthly mortgage payment of $1,610.
That’s if there are starter homes out there to buy. Redfin Senior Economist Sheharyar Bokhari is pessimistic. “Buyers searching for starter homes in today’s market are on a wild goose chase because in many parts of the country, there’s no such thing as a starter home anymore,” she said.
The one-two punch of higher mortgage rates and higher home prices drives the higher salary demand. The typical starter home sold for a record $243,000 in June, up 2.1% from a year earlier and up more than 45% from before the pandemic. Average mortgage rates hit 6.7% in June, up from 5.5% the year before and just under 4% before the pandemic.
A person looking to buy today’s typical starter home would have a monthly mortgage payment of $1,610, up 13% from a year ago and nearly double the typical payment just before the pandemic. Average U.S. wages have risen 4.4% from a year ago and roughly 20% from before the pandemic, not nearly enough to make up for the jump in monthly mortgage payments.
Prices for starter homes continue to tick up because there are so few homes for sale, often prompting competition and pushing up prices for those that hit the market. New listings of starter homes for sale dropped 23% from a year earlier in June, the most significant drop since the start of the pandemic. The total number of starter homes on the market is down 15%, the biggest drop since the start of the pandemic. Limited listings and still-rising prices have stifled sales activity, exacerbated by high mortgage rates. Sales of starter homes dropped 17% year over year in June.
San Francisco, Austin, and Phoenix are the only U.S. metros where starter-home buyers need less income than they did a year ago, but the salaries needed are still well above the national average. In San Francisco, it is $241,200, Austin $92,000, and Phoenix $86,100.
