First-Time Buyers Must Earn $120,000 To Afford The Average Home

Earlier today we reported that for at least 40% of Americans - up from 27% just two years ago - the American Dream is dead and buried and has been replaced with the American nightmare: renting for life.

And here's why: according to a new survey from Clever Real Estate, a St. Louis-based real estate company, thanks to the galloping housing inflation, the median-priced home in the U.S. now costs $332,494, with NAR and Census Bureau data reporting that the median Existing and New Home sale price has risen to $393,500 and $430,700...

first time buyers must earn 120000 to afford the average home

... meaning prospective buyers need an annual income of at least $119,769 to afford it with a 10% down payment.

first time buyers must earn 120000 to afford the average home

That's about $45,000 more than the typical household earns annually ($74,755). Even with a 20% down payment, home buyers would need to earn at least $98,202, still well above the typical salary.

The last year that the median buyer put down 20% was 1989, according to data from the National Association of Realtors (NAR). Today, the median buyer puts down just 15% of a home's purchase price.

The median U.S. income earner ($74,755) with 10% down could only afford a home that costs $207,529 — 38% less than the current median-priced home.

A median-income family aiming to afford a median-priced home would need a hefty 45% down payment, or mortgage rates would need to drop from the current rate of 7.2% to 4% to make it work.

Even with a savings rate of $1,000 each month, it would take a household five and a half years to amass the $66,500 needed for a 20% down payment on a home priced at the median of $332,494.

As it stands, 61% of Americans find themselves priced out of the market even with a 20% down payment.

The median home is affordable for median earners in just four states (West Virginia, Ohio, Iowa, and Indiana)...

first time buyers must earn 120000 to afford the average home

... and only six of the 50 largest metro areas:

  1. Pittsburgh, PA
  2. Cleveland, OH
  3. St. Louis, MO
  4. Memphis, TN
  5. Indianapolis, IN
  6. Birmingham, AL

Unsurprisingly, Los Angeles is the least affordable city, where buyers need an income of a whopping $249,471 to comfortably afford a median-priced home — nearly three times the actual median income of $87,743.

first time buyers must earn 120000 to afford the average home

Read the full report at: http://www.listwithclever.com/research/how-much-house-can-i-afford-2024

Authored by Tyler Durden via ZeroHedge April 24th 2024