According to a research conducted by real estate agency Redfin, homebuyers in the U.S. must earn six-figure wages in order to purchase a median-priced property.
As house prices remain high and the average monthly mortgage payment has grown by more than 45% over the same time last year to $2,682, the yearly wage necessary to finance such a home has risen from $73,668 to $107,281. Over the same time span, average hourly salaries have climbed nominally by 5%, while inflation continues to erode consumer buying power.
“High rates are pushing buyers to reconsider their choices, as many of them are no longer able to afford the property they want in the area they desire,” said Redfin Agent Chelsea Traylor, who works in Washington, D.C. “If you had a $900,000 budget just a few months ago, higher interest rates mean it’s now approximately $700,000 – and sellers aren’t decreasing their prices enough to compensate. As a result, purchasers are looking for more cheap properties outside of the city.”
Four of the five metropolitan areas with the fastest increases in the annual income necessary to purchase a median-priced home are in Florida. Buyers in North Port must make $131,535 to afford a $3,288 payment each month, while those in Miami, Tampa, and Cape Coral must also earn six figures.
Meanwhile, the five most expensive urban regions are all in California, with purchasers in San Francisco needing a $402,821 wage to afford a $10,071 monthly payment. According to a prior analysis from the National Association of Home Builders, California has all of the least affordable real estate in the country.
According to Census Bureau data, Florida saw the nation’s biggest net domestic migration between July of 2020 and July 2021, with over 220,000 individuals relocating to the state. In terms of population decline, Florida was followed by Texas and Arizona, while New York, California, and Illinois topped the nation.
Traylor mentioned that some purchasers are waiting for prices or interest rates to fall before purchasing a property. “I’m asking customers to consider the long term,” she added. “Price drops are unlikely in the long term, so purchasing a home today — assuming you can manage the monthly payment — can still help you grow wealth over time, especially if you expect to live in it for several years. Despite the fact that interest rates are high, another great thing about buying today is the absence of competition and the ability to negotiate with sellers.”
A year ago, homebuyers in the 16 metropolitan regions analyzed by Redfin only required six-figure earnings to afford a median-priced property. However, comparable situations exist in 45 cities today.
Recent losses in house affordability coincide with one of the most persistent hikes in mortgage rates in decades. According to Freddie Mac statistics, the 30-year fixed mortgage rate has been below 3% for the most of the last two years. The rate increased from roughly 3% earlier this year to more than 7% this month, with most of the increases happening after the Federal Reserve boosted target interest rates at four straight 0.75% increments.
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