Redfin Reports Buying a Starter Home Is Now Cheaper Than It Was a Year Ago
There are four major metros where the typical starter home went from unaffordable to affordable in the last year. They’re all in
Starter-home prices are up
“It’s great news that starter homes are becoming a little more affordable, but there’s a catch,” said Redfin Senior Economist Elijah de la Campa. “Starter homes aren’t what they used to be. A decade ago, a turnkey four-bedroom house in a nice neighborhood was often considered a starter home, but today, a small fixer-upper condo is often all a first-time homebuyer can afford. The American Dream is changing; for many, it no longer involves a house and a white picket fence.”
House hunters should be aware that starter-home affordability may not improve much more, if at all, in the near future. The Federal Reserve’s latest interest rate cut and its plans for future cuts were highly anticipated, meaning they’re mostly priced into mortgage rates already. When the Fed cuts short-term interest rates, long-term rates like mortgage rates don't always move down nearly as much. Home prices also tend to rise over time, so waiting to buy likely means a higher price tag and down payment.
Both Kamala Harris and Donald Trump have said they want to make homes more affordable, so buyers may get more clarity on how the next president will tackle the housing affordability crisis come November.
Starter Homes Are Much Less Affordable Than They Were Before the Pandemic
The typical household earns an estimated
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August 2024 |
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August 2012 |
Income needed to afford median priced starter home |
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Median household income |
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Starter home median sale price |
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Share of starter-home listings affordable to typical household |
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Share of income typical household would need to spend to buy median priced starter home |
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Housing prices skyrocketed during the pandemic home buying frenzy as a severe shortage of homes for sale coincided with a surge in demand that was fueled by record-low mortgage rates. Starter-home prices are now
Three-quarters (
“While many people make enough on paper to afford a starter home, they often have other expenses like student debt that are preventing them from buying,” said Blakely Minton, a Redfin Premier real estate agent in
“Starter-home buyers are skewing older than they used to. When I first started working in real estate 20 years ago, they were kids fresh out of college. Now grads are saddled with huge student loans and are moving back in with Mom and Dad or renting,” Minton said. “I bought my first house at 23, but that’s hard to do today, in part because first-time buyers are competing with older Americans who want to downsize and are able to make higher offers.”
A household on the median income would need to spend
A household earning only
Pandemic Boomtowns See Steepest Drops in Income Needed to Afford a Starter Home
In
Home prices in many of the aforementioned metros soared during the pandemic as scores of out-of-towners moved in, but are now coming back down to earth. Starter-home prices in
It’s worth noting that
In Four Metros, Starter Homes Went From Unaffordable in 2023 to Affordable in 2024
There were four metros where starter homes went from unaffordable in 2023 to affordable in 2024, meaning a household on the median income would now need to spend less than
In
The Midwest Is Home to Three of Five Metros With Biggest Increases in Income Needed to Afford a Home
In
These metros have seen some of the biggest jumps in home prices, which is driving up the income needed to afford a home. Starter-home prices in
Many homebuyers have flocked to the Midwest in recent years because it’s known to be more affordable. That influx of demand has helped push up home prices.
To view the full report, including charts, please visit: https://www.redfin.com/news/income-needed-to-afford-starter-home-declines
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Redfin Journalist Services:
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press@redfin.com
Source: Redfin