Redfin: Amount Buyers Must Earn to Afford Typical Starter Home Just Shy of All-Time High
(Image courtesy of Redfin; Breakout image courtesy of RDNE Stock project/pexels.com)
Redfin, Seattle, found homebuyers need to earn $79,252 annually to afford the median-priced starter home, only about $500 below the all-time high notched in October 2023 and up 4.4% year-over-year.
The monthly housing payment for a typical starter home–$1,981–is also up 4.4% from last summer.
In contrast, the typical U.S. household earns an estimated $83,966. Currently, roughly 70% of U.S. starter homes would be affordable to the median-earning household, down from 73% this time last year.
Redfin defines “starter homes” as those that fall into the 5th to 35th percentile of home prices. The typical starter home sold for a record $250,000 in July, Redfin noted.
Moreover, it defines affordable as a house for which a buyer spends no more than 30% of their income on housing, assuming a 3.5% down payment.
The issue is even more pronounced in certain areas. For example, the affordability gap for starter homes is biggest in California, especially in Los Angeles and Anaheim, where a family would need to earn double the local income to afford a typical starter home.
San Diego, San Francisco and San Jose present similar, if slightly, less pronounced, disparities.
In contrast, Detroit was deemed the most affordable metro for starter homes–the median household income is $63,937, and a family needs to earn $24,590 to buy a starter home.
Only one metro saw the income needed to buy a starter home decline–Austin, Texas. There, a family needs to earn $117,781 to afford the median-priced starter home, down 2.5% year-over-year. However, it’s worth noting the median income for Austin is still below that, at $103,945.
