Buying a home is getting increasingly difficult for first-time home buyers who typically put less money down in exchange for higher monthly payments, according to economists.
First-time homebuyers have to earn nearly twice as much money to purchase a starter home compared with pre-COVID-19 pandemic times. As of February, first time buyers needed to earn $75,849 annually to afford the typical U.S. starter home, which is nearly $6,000 more than they did a year ago, due to elevated mortgage rates and high home prices, according to recent data from Redfin.
While incomes are on the rise, they are not keeping pace with the rate of starter-home costs. As of February, a typical American household earned an estimated $84,072, up 5.5% from a year earlier. In comparison, the income needed to purchase a starter home jumped 8.2% from a year earlier. Today, the median income is 11% higher than what's needed to buy a starter home. However, a year ago, it was 14% higher, and during pre-pandemic times, it was 63% higher, according to Redfin.
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