Americans hoping to buy their first home must now earn roughly $80,000 to afford a median-priced starter home, according to a new report.
Real estate brokerage Redfin recently reported that the monthly housing payment for a typical starter home in the US was $1,981 in July. That marks a 4.4% increase year-over-year. To comfortably afford the costs, hopeful homebuyers must now earn at least $79,252 annually. T
That is also up 4.4% year-over-year compared to July 2023 and just $500 shy of the all-time high recorded in October.
As of the second quarter of 2024, American workers earned a median wage of $1,143 per week, which would amount to $59,436 yearly, per data from the Bureau of Labor Statistics (BLS). This means Americans are earning $20,000 less than they need to afford a typical US starter home.
The recent rise in home prices, attributed to elevated mortgage rates and a lack of inventory in the market, has now pushed median-income and lower-income households out of the market. While the average hourly wages have increased by 3.6% year-over-year in July, they are not increasing fast enough to afford a starter home, the Redfin report noted.
Where Are Starter Homes Most Unaffordable?
The report analyzed estimated US incomes and median monthly housing payments for starter homes sold in July 2024 to determine where affordability is the worst. The analysis found that of the 50 most populous metro areas in the US, families living in at least half of them could not afford to buy a starter home.
The affordability gap for starter homes was the biggest in California. In Anaheim and Los Angeles, for example, households need to earn nearly twice the local income to afford a starter home.
Here are the five metro areas where starter homes are most unaffordable.
San Jose, CA
Median sale price of a starter home: $970,000
Median local household income: $170,034
Income needed to afford a starter home: $299,414
Anaheim, CA
Median sale price of a starter home: $740,000
Median local household income: $122,192
Income needed to afford a starter home: $251,302
San Francisco, CA
Median sale price of a starter home: $950,000
Median local household income: $159,665
Income needed to afford a starter home: $285,426
Los Angeles, CA
Median sale price of a starter home: $615,000
Median local household income: $93,197
Income needed to afford a starter home: $184,477
San Diego, CA
Median sale price of a starter home: $652,750
Median local household income: $108,352
Income needed to afford a starter home: $197,978
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