Affordable homes for first-time buyers have disappeared

Affordable homes for first-time buyers have disappeared

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With mortgage rates remaining at a staggering 7%, the hopes of many hoping to secure their first home has dwindled.

The current average for a starter home runs $243,000 — and that price tag has become out of reach for many Americans, if in fact they can even find a starter home with the current high demand.

Calculating the average nationwide, first-time homebuyers must earn at least $64,500 a year to cover costs of an entry-level home while at the same time ensuring it doesn’t exceed 30% of their income, according to real estate brokerage Redfin.

The average earnings needed is up 13% ($7,200) from a year ago.

The record $243,000 price tag is up up 2.1% from a year earlier and up more than 45% from before the coronavirus pandemic.

“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,” Sheharyar Bokhari, Redfin senior economist, said in the report. “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.”

Home for sale

During the pandemic, home prices shot up due to low mortgage rates and remote work, which was the start of the home affordability crisis.

Someone 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 that from just before the pandemic.

“That’s locking many Americans out of the housing market altogether, preventing them from building equity and ultimately building lasting wealth,” Bokhari said. “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 for sale

Meanwhile, prospective first-time homebuyers are struggling between buying or renting, as rents remain at an all-time high as well.

BY

Source: https://nypost.com/

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