You don’t have to be a millionaire to buy a house, but earning six figures will help.
The typical American family needs an annual income of $115,000 to buy a median-priced home, which is $40,000 more than the average family earns, according to Redfin chief economist Darrell Fairweather.
“Even places that were historically affordable now need six figures,” she told CBS MoneyWatch.
In expensive San Francisco, it may not be surprising to learn that a household income of more than $400,000 is needed to cover the costs of the average home. But what about Boise, Idaho, where the number is $127,000. In fact, a six-figure income is required to buy a median-priced home in at least 50 U.S. cities, according to data from Redfin.
Unless you’re a white-collar worker who works remotely and can move downtown, now may not be the best time to buy a home. As Greg McBride, chief financial analyst at Bankrate.com, tells those looking to buy a home: “You’re not getting a bargain. In most major markets, especially the Eastern Continental, home prices are at record levels, and the cost of financing a purchase is the highest it’s been since. “More than 20 years.”
The rise in home prices is largely due to mortgage rates, which now stand at 7.5%, making…Fairweather noted that there is a house in all American cities except four: Detroit, Cleveland, Philadelphia, and Houston.
Another reason for rising home values is the limited supply of existing homes, as owners are unwilling or reluctant to sell in an environment where they are affording a low mortgage rate.
“Mortgage rates may come down at some point, but we’re not going back to 3% — they’re not going back to 2020 levels,” McBride said.
“It’s going to take a recession, and we don’t want that,” Fairweather said.
The Mortgage Bankers Association said prospective homebuyers are getting at least a modicum of relief in the form of a second straight weekly decline in the average rate of a typical 30-year mortgage, which last week fell by 25 basis points to 7.61%. Wednesday. Biggest weekly interest rate drop since June 2022 led to 2.5% weekly increase in mortgage applications, MBA advertiser.
The opposite could be said of the rental market, which is seeing increased supply amid new construction and a slowdown in immigration, McBride noted. “The rental picture has been better lately,” he said. “Supply and demand are not as difficult as they were after the pandemic. Asking prices are not higher than they were a year ago.”
Both frustrated and aspiring homeowners can benefit, McBride said.
“Instead of stretching out to buy a place now, it’s better to take 18 months to pay off debt, build up savings and get another promotion at work,” he advised. “Homeownership will be much more viable than it is today. You could do a lot worse than renting in the meantime.”
Although there are fewer home purchases now than they have been since the Great Recession, more inventory will eventually become available as people move, whether getting married, divorced, having a child or moving for work, Fairweather said. People should focus on their personal circumstances and “not worry about timing the market, because the market is really hard to time.”
Residential properties tend to go through booms, McBride added.
“House prices rise rapidly for two or three years, then don’t change much for six to 10 years,” he said. “There is some reassurance in that for the aspiring homeowner who has seen prices rise so much that it won’t be forever.”
Affluent Americans who can afford cash are becoming more likely to buy homes in an expensive housing market, as the income needed to purchase a home is higher than ever, and rising mortgage rates make buying a home with cash and completely avoiding interest more attractive.
In dollar terms, the average down payment was $60,980 in September, according to Business Insider. to Redfin. This is approximately 15% more than the previous year, and the largest increase since June 2022.
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”