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WASHINGTON \u2014<\/p>\nWASHINGTON \u2014<\/p>\n
As the rise in home prices outpaces income, many first-time buyers don’t earn enough to afford a starter home.<\/p>\n
The latest data from the National Association of Realtors<\/a> showed that the monthly mortgage payment for a typical starter home in the U.S. was $2,158. That would require a first-time buyer to earn an income of at least $103,584, factoring in interest rates and down payment.<\/p>\n But nationally, the median income for first-time buyers is short of that at about $72,100.<\/p>\n A starter home is often described as a smaller home purchased by a first-time buyer with the goal of getting into the market, but defining it with data is more complex. <\/p>\n The National Association of Realtors defines it as homes that are 85% of the median home value. But first-time home buyers are actually only able to afford homes that are about 60% of the median home sale price.<\/p>\n \u201cThere is a pretty big gap between what we traditionally call a starter home and what many first-time buyers can actually afford,\u201d Nadia Evangelou, a principal economist and director of real estate research for the National Association of Realtors, said.<\/p>\n The National Association of Realtors calculates a home affordability index for first-time buyers using the 85% data point and income data. <\/p>\n When the index is above 100, it means starter homes are affordable for a family earning the median income. It’s been below 100 since around 2021. <\/p>\n The recent trend of low affordability for first-time buyers, isn’t because there’s a shortage of starter homes, Evangelou said. There’s more starter homes today than there were 20 years ago.<\/p>\n The high cost of rent prevents people from saving. Plus interest rates have also risen to 7.28%<\/a>. <\/p>\n Evangelou also pointed to the age of the typical owner of starter homes, which is 59. <\/p>\n “For many people, their starter home became their long-term home,” Evangelou said. <\/p>\n The difficulties reflect consumer sentiment as well. About 9 in 10 young adults say it’s more difficult for young people to buy a home than it was for their parents, according to the Pew Research Center<\/a>.<\/p>\n Affordability at the national level looks a lot different from the local level.<\/p>\n