Americans have to earn 13% more than they did in 2022 to purchase their first home. A recent report by Redfin revealed that first-time homebuyers need to earn at least $64,500 per year. This is an increase of $7,200 from what they needed just a year ago if they wanted to buy their first home.
This rise is a record since the average sales price of a normal home reached $243,000 in June. This is 2.1% more than a year ago and a 45% increase compared to the price of a first-time homebuyer in the years before the pandemic, according to the report. The document also points out that the price increase may be due to the fact that there is not as much supply of houses nowadays, since there are not as many houses being built as there were a few years ago.
The need to be more affluent than in 2022 to purchase a first-time home, it is not the same in every city in the nation. According to Redfin, in locations such as San Francisco, Austin and Phoenix, housing can be found below last year's average rates. On the other hand, in Miami, those citizens who want to buy a house for the first time will have to pay 25% more than last year, since the average price of starter homes in the Florida city is $300,000.
Summer, the worst time to buy a home
Prices continue to rise but do so more in the summer, especially due to the increase in interest rates announced by the Federal Reserve in July in an attempt to curb inflation. That caused, as detailed by the National Association of Realtors (NAR), the median price of a home to rise again, this time to more than $400,000. An increase that, according to Edward Seiler, associate vice president of the Mortgage Bankers Association (MBA), is even more noticeable between June and September:
Homebuyer affordability is still strained this summer, with mortgage rates remaining high and volatile, and home prices high because of low inventory.
Mortgage rates also increased by 1.2%. Thus, if they were at 5.5% in 2022, last June they stood at 6.7%. This is significantly higher than the 4% recorded just before the pandemic began three years ago.
This caused many people who might sell their homes to wait because they feared they would be faced with a mortgage rate that was too high. An important element that also affects the low availability of housing on the market. This was explained by RubyHome's CEO, Tony Mariotti, in statements reported by ZeroHedge:
Homeowners that bought a few years ago, at lower prices and at lower interest rates, can feel trapped. If they’ve considered buying a new home, they’ve looked around at today’s higher home prices and also know they can never replace the historically low interest rate they have now.
Lack of new housing, a further complication for buyers
It is no longer only the time of the year in which the property is purchased that is a problem, but also the fact that there are no new houses being constructed is a major complication. A fact that has worsened after the rise in prices in practically all sectors and which caused the number of new construction homes available for sale last June to be 23% lower than that recorded in the last 12 months.
Sheharyan Bokhari, a senior economist at Redfin, explained how this affects people looking to buy their first home, "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."
This could account for a person having to earn 13% more than in 2022. It also justifies that sales of new construction homes fell 17% in June 2023 compared to the same period last year as the need for higher employment and complications in finding a new homes hurt this whole process.
