In its latest research, Redfin reports that according to their estimates, a homebuyer must earn $107,281 a year in order to be able to afford the typical monthly US mortgage payment of $2,682.00. That number is up 45.6% from a year ago, when the homebuyer needed to earn an estimated $73,668.00.
Redfin explains that the increase in earnings levels is due to mortgage rates that have more than doubled over the past 12 months, combined with consistently higher home prices. From February 2020 (just before the onset of the COVID-19 pandemic) to October 2022, the monthly payment for an American family buying the median-priced home increased roughly 70%.
Affordability challenges are a major reason why home sales have slowed so dramatically over the last few months. Redfin agent Chelsea Taylor summed it up this way for the report:
“High rates are making buyers rethink their priorities, as many of them can no longer afford the home they want, in the location that they want. If you had a budget of $900,000 a few months ago, rising rates mean it’s now around $700,000—and sellers are not dropping their prices enough to make up for the change. So, buyers are searching further away from city for more affordable areas or waiting for prices/rates to come down before making a move.”
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