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First-time buyers need 13 percent more in earnings to afford today’s high-priced starter homes on July 28, 2023 at 3:59 pm Business News | The Hill
High home prices are straining the budgets of first-time homebuyers as the ongoing housing shortage pushed the cost of starter homes to a record high, according to a report.
The sale price of a typical starter home reached $243,000 in June, up 2.1 percent from a year ago and 45 percent above pre-pandemic levels, the report from real estate brokerage Redfin showed.
A first-time buyer needs to earn $64,500 annually to afford a home at this price point, a 13 percent increase from last year. San Francisco, Austin and Phoenix are the only metros analyzed by Redfin where buyers can earn less than last year and afford a starter home.
But buyers in Miami need 25 percent more income than last year to afford starter homes priced at $300,000.
“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,” Redfin senior economist Sheharyar Bokhari said in a statement, adding that high housing costs and stubbornly high mortgage rates continue to push potential buyers to the sidelines.
A home under construction at a development in Eagleville, Pa., is shown April 28, 2023. The sale price of a typical starter home reached $243,000 in June, up 2.1 percent from a year ago and 45 percent above pre-pandemic levels, a report from real estate brokerage Redfin showed. (AP Photo/Matt Rourke)
“People who are already homeowners are sitting pretty, comparatively, because most of them have benefited from home values soaring over the last few years,” Bokhari continued. “That could lead to the wealth gap in this country becoming even more drastic.”
Home prices are up again in parts of the country following a cooling period brought on by the Federal Reserve’s effort to slow the pace of inflation by raising interest rates.
Low inventory continues to drive prices and the lack of options moved up the median cost of a home to more than $400,000 for only the third time on record, according to data from the National Association of Realtors (NAR).
And Federal Reserve Board Chairman Jerome Powell said Wednesday that the housing market has “a ways to go” before it reaches a balance and prices cool.
Separate market data shows demand is still rising as pending home sales — a forward-looking indicator of home sales based on contract signings — increased for the first time since February.
“The recovery has not taken place, but the housing recession is over,” NAR’s Chief Economist Lawrence Yun said in a statement. “The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply. Homebuilders are ramping up production and hiring workers.”
And Yun added that inflation data showing further signs of cooling bode well for mortgage rates that have constrained affordability for more than a year.
“With consumer price inflation calming close to the Federal Reserve’s desired conditions, mortgage rates look to have topped out,” Yun said. “Given the ongoing job additions, any meaningful decline in mortgage rates could lead to a rush of buyers later in the year and into the next.”
NAR is projecting that the 30-year fixed rate mortgage will dip to 6.4 percent this year and decline to 6 percent in 2024.
Business, Housing, Home prices, home sales, housing market, housing shortage High home prices are straining the budgets of first-time homebuyers as the ongoing housing shortage pushed the cost of starter homes to a record high, according to a report. The sale price of a typical starter home reached $243,000 in June, up 2.1 percent from a year ago and 45 percent above pre-pandemic levels, the…
