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Home affordability gap for first-time buyers widens as costs rise
WLWT • • 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 only about $72,100.
- Starter homes are defined by the National Association of Realtors as 85% of the median home value, but first-time buyers can generally afford only about 60% of the median home price, creating a significant affordability gap.
- 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 incomes nationwide.
- The lack of affordability is not due to a shortage of starter homes, as there are more now than 20 years ago, but is driven by high rent costs, rising interest rates (currently 7.28%), and many starter homes being retained as long-term residences.
- Affordability challenges vary locally, with about 80% of U.S. metropolitan areas showing affordability scores below 100, meaning median incomes in those areas are insufficient to qualify for starter home mortgages.
