Nationally it’s 13%, but in Fort Lauderdale it’s 28% – the highest in the U.S. In Miami, a first-time buyer needs to earn 25% more than they did a year ago.
SEATTLE – A first-time homebuyer must earn roughly $64,500 per year to afford the typical U.S. “starter” home, up 13% ($7,200) from June a year ago, according to a report from Redfin, thanks to the one-two punch of higher mortgage rates and higher home prices.
It’s even worse in many Florida metros, with the strongest demand for a higher income occurring in Broward County. Fort Lauderdale buyers need to earn $58,300 per year to purchase a $220,000 home, the typical price for a starter home in that area – 28% more year-to-year. Of the 50 most populous U.S. metros, it saw the biggest uptick.
Next comes Miami, where buyers need to earn $79,500 (up 24.8%) to afford the typical $300,000 starter home.
Rounding out the top three is Newark, NJ, where buyers need $88,800 (up 21.1%) to afford a $335,000 home. Fort Lauderdale (up 15.8%), Miami (up 13.2%) and Newark (up 9.8%) also had the biggest starter-home price increases.
While starter-home prices have risen most in Florida, however, the state is still generally less expensive than places like Austin or Phoenix, where home prices skyrocketed during the pandemic and have since come down some.
Prices are rising in Florida because out-of-town remote workers and retirees that are flocking in despite climate risks. That’s largely due to warm weather and relative affordability. Even though prices soared during the pandemic, homes are still typically less expensive than a place like New York, Boston or Los Angeles. Five of the 10 most popular metros for relocating homebuyers are in Florida.
Nationally, the typical starter home sold for a record $243,000 in June, up 2.1% from a year earlier and up more than 45% from before the pandemic. Average mortgage rates hit 6.7% in June, up from 5.5% the year before and just under 4% before the pandemic.
New listings of starter homes for sale dropped 23% from a year earlier in June, the biggest drop since the start of the pandemic. The total number of starter homes on the market is down 15%, also the biggest drop since the start of the pandemic. Limited listings and still-rising prices, exacerbated by high mortgage rates, have stifled sales activity. Sales of starter homes dropped 17% year over year in June.
San Francisco, Austin and Phoenix are the only U.S. metros where starter-home buyers need less income than they did a year ago
“Buyers searching for starter homes in today’s market are on a wild goose chase because in many parts of the country, there’s no such thing as a starter home anymore,” says Redfin Senior Economist Sheharyar Bokhari. “The most affordable homes for sale are no longer affordable to people with lower budgets due to the combination of rising prices and rising rates. That’s locking many Americans out of the housing market altogether, preventing them from building equity and ultimately building lasting wealth. People who are already homeowners are sitting pretty, comparatively, because most of them have benefited from home values soaring over the last few years. That could lead to the wealth gap in this country becoming even more drastic.”
Home prices shot up during the pandemic due to record-low mortgage rates and remote work, and now rising mortgage rates are exacerbating the affordability crisis, especially for first-time buyers. A person looking to buy today’s typical starter home would have a monthly mortgage payment of $1,610, up 13% from a year ago and nearly double the typical payment just before the pandemic. Average U.S. wages have risen 4.4% from a year ago and roughly 20% from before the pandemic, not nearly enough to make up for the jump in monthly mortgage payments.
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