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Home affordability gap for first-time buyers widens as costs rise
KCCI • • business
Key Points:
- The monthly mortgage payment for a typical U.S. starter home is $2,158, requiring a first-time buyer income of at least $103,584, while the median income for first-time buyers is about $72,100.
- First-time buyers can generally afford homes priced at about 60% of the median home sale price, which is significantly lower than the National Association of Realtors' definition of starter homes at 85% of median home value.
- The home affordability index for first-time buyers has been below 100 since 2021, indicating that starter homes are generally unaffordable for families earning median income.
- The shortage of affordability is not due to a lack of starter homes, which are more plentiful than 20 years ago, but is driven by high rent costs limiting savings and rising interest rates currently at 7.28%.
- Affordability challenges vary locally, with about 80% of U.S. metropolitan areas showing affordability scores below 100, meaning median incomes in these areas are insufficient to qualify for starter home mortgages.
