WASHINGTON —
With rising house prices outpacing incomes, many first-time buyers are not earning enough to afford their first home.
The latest data from the National Association of Realtors showed that the monthly mortgage payment for a typical first home in the United States was $2,158. This would require a first-time buyer to earn an income of at least $103,584, taking into account interest rates and down payment.
But nationally, the median income for first-time buyers is lower than that amount, at about $72,100.
A first-time home is often described as a smaller home purchased by a first-time buyer with the goal of entering the market, but defining it using data is more complex.
The National Association of Realtors defines it as homes that represent 85% of the median home value. But first-time home buyers can really only afford homes that are about 60% of the median home sales price.
“There is a pretty significant gap between what we traditionally call a starter home and what many first-time buyers can actually afford,” said Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors.
The National Association of Realtors calculates a housing affordability index for first-time buyers using the 85% data point and income data.
When the index is above 100, it means that starter homes are affordable for a family earning the median income. It has been below 100 since around 2021.
The recent trend of low affordability for first-time buyers is not due to a shortage of starter homes, Evangelou said. There are more starter homes today than there were 20 years ago.
The high cost of rent prevents people from saving. Positive interest rates also increased to 7.28%.
Evangelou also highlighted the typical age of a first-time homeowner, which is 59 years old.
“For many people, their first home has become their long-term residence,” Evangelou said.
The difficulties also reflect consumer confidence. According to the Pew Research Center, about 9 in 10 young adults say it is more difficult for young people to buy a home than it was for their parents.
Affordability at the national level is very different from that at the local level.
The Get the Facts Data team analyzed data from the National Association of Realtors on housing affordability for first-time buyers by metro area. The data includes an analysis of 177 metropolitan areas in the United States
About 80% of metro areas had affordability scores below 100 for first-time buyers, meaning people earned a median income below the qualifying income needed to buy a first home.
Find out how affordable your city is in the interactive video below.
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