A recent report found that nearly half the country requires a six-figure salary to buy a home, compared to just four years ago when six states required the same income. ing.
In 22 states and Washington, D.C., buyers need an income of at least $110,871 to comfortably afford a median-priced home of $402,343, according to an analysis by financial services firm Bankrate. There was found.
Meanwhile, in 2020, Americans could afford to buy the average home just by earning such high salaries in six states, as well as the District of Columbia.
Homebuyers in California, Hawaii, Washington DC, Massachusetts and Washington state need the most income to buy a typical home, according to a Bankrate study first reported by CNN. The price ranges from $156,814 to $197,057.
Meanwhile, in New York state, aspiring home buyers need to earn nearly $150,000, while buyers in New Jersey need to earn at least $152,186 a year to buy the average home. be.
“Affordability is the biggest issue,” said Jeff Ostrowsky, a housing market analyst at Bankrate. “The more expensive a home is, the harder it is to come up with a down payment or qualify for a monthly payment.”
At the same time, “housing is becoming less affordable because home price growth has so far outpaced wage growth,” Ostrovsky told CNN.
Mortgage rates have also skyrocketed since the pandemic. This is a result of stubbornly high interest rates making it more expensive for banks to borrow capital.
Fed officials have kept interest rates at their current 22-year high of 5.25% to 5.5% since their July 2023 policy meeting.
As of Thursday, the average interest rate on a 30-year fixed-rate mortgage was a whopping 6.79%, nearly double what it was four years ago, according to Freddie Mac.
At the beginning of 2020, mortgage interest rates averaged about 3.7%. Meanwhile, the Fed's benchmark federal funds rate was 1.5%-1.75%.
According to Bankrate, Montana had the largest increase in the income needed to buy a home at 77.7%, followed by Utah and Tennessee, which saw increases of more than 70%.
South Carolina and Arizona were among the top five states with the largest increases in the annual income required to buy a typical home since the beginning of 2020, at 67.3% and 65.3%, respectively.
In contrast, aspiring homeowners in Mississippi, Ohio, Arkansas, Indiana, and Kentucky spend a minimum annual income ($63,043 to $65,186) to purchase a typical home. There is a need to.
Bankrate's findings are highlighted by another recent report from Realtor.com. The report found that as of February, it was cheaper to rent than buy a home by a shocking margin in the top 50 metro areas.
Some argue that so-called “starter homes” in these popular cities no longer exist due to high borrowing rates and soaring house prices, but it's 60.1% more expensive to lease than own the property. is cheap. on a monthly basis, according to his February 2024 rental report on Realtor.com.
On average, in the most popular cities like Austin, Texas, the high premium of homeownership amounts to about $1,027 in monthly costs. In Seattle and Phoenix, Arizona, that number is more than double.
