Initial homes have gone from unaffordable to affordable in two states
Buying a home is cheaper to begin with than it was last year, and you can thank mortgage rates for that. But while initial home prices themselves are more expensive than a year ago, the income needed to buy a home has fallen as mortgage rates fall, according to Redfin.
For a monthly payment on an average starting home of $250,000, would-be buyers need to earn $76,995 a year. The analysis showed the decline was 0.4% lower than a year ago and was the first annual decline in about four years. IN forecast of interest rate cuts from the Federal Reserve, mortgage rates fell this summer. Redfin said the average 30-year fixed rate fell to 6.5% in August from 7.07% a year earlier. It decreased even further, with Read the latest weekly reached 6.08%.
“It’s great news that starter homes are becoming a little more affordable, but there’s a catch,” Redfin senior economist Elijah de la Campa said in the analysis. . “Starter homes aren’t what they used to be. A decade ago, a four-bedroom turnkey home in a nice neighborhood was often considered a starter home, but today, a small apartment in need of repairs is often all buyers need. First time home can be purchased. The American Dream is changing; For many people, it no longer involves a house and a white picket fence.”
But not only are starter homes not what they used to be, they’re also much more expensive than they were before the pandemic, like all homes. According to Redfin, home starting prices are 51.1% higher than August 2019 and 163% higher than August 2012.
Today, the typical household earns an estimated $83,853 a year, 8.9% more than they would need to buy a median-priced starter home and the mortgage that comes with it. That’s a significant improvement over last year, when the typical household earned just 3% more than they needed.
“But that’s a step back from before the pandemic,” Redfin noted, when the typical household earned 57.1% more than they needed to buy a median-priced starter home.
Want to know how much different it is compared to a decade ago? It will hurt. In August 2012, the typical household earned twice as much money as they needed to buy a typical home.
Not to mention, even though homes started out cheaper than last year, there were only four metro areas in two states where they went from unaffordable to affordable, meaning a household could can spend less than 30% of their income on a typical starter home. home page. That’s in West Palm Beach and Fort Lauderdale in Florida, along with Dallas and Fort Worth in Texas. Those boom towns are overflowing apartment surplus and saw a spike in overall housing supply, but also a flood of insurance woes.
There are some pandemic boom towns that are seeing the income needed for starter homes plummet, from Anaheim to Austin to Phoenix, but that still doesn’t mean they’re affordable. perhaps. According to Redfin, Anaheim is one of the most expensive metros in the country, where less than 0.1% of initial home listings are affordable for a median-income household. And there are some major cities where the income increase needed for first-time homebuyers is quite significant, such as Chicago and Los Angeles.
About three-quarters of starter homes for sale are affordable to middle-income households, which is again an improvement from last August and sounds reasonable, but it that’s down from nearly 100% in both 2019 and 2012. Either way, that doesn’t even count those who don’t make the median income, which we know not everyone does . Everything has changed in the budding family world.
“Beginning home buyers are older than they used to be. When I first started working in real estate 20 years ago, they were fresh graduates. Now, graduates are saddled with huge student loans and are moving back in with their parents or renting,” one real estate agent said in the analysis. “I bought my first home at 23, but that’s hard to do these days, in part because first-time buyers are competing with older Americans who want to downsize and can offer higher offer.”
