First-Time Homebuyers Continue to Struggle to Find Affordable Starter Homes

Redfin reported on Friday (7-28-23) that first-time homebuyers must earn approximately $64,500 per year to afford a typical US “starter” home. Year-over-year, the earning level is up 13%, or $7,200.

Redfin is reporting that the typical starter home sold for a record $243,000 in June, up 2.1% from a year ago and up more than 45% from pre-pandemic levels. Average mortgage rates hit 6.7% in June, up from 5.5% in June 2022 and just under 4% prior to the pandemic. Rents also remain elevated. The typical asking rent is now just $24 below the $2,053 record high in 2022.

Adding additional background and his analysis to the report, Redfin’s Senior Economist Sheharyar Bokhari said:

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