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Market Watch

Buyers need $107,000 annually to afford typical home

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Market Watch
Monday, December 19, 2022

A homebuyer must earn $107,281 a year to afford the $2,682 monthly mortgage payment on the typical U.S. home, up 45.6 percent from $73,668 a year ago, according to a Redfin report. The increase is due to mortgage rates more than doubling over the last year, combined with persistently high home prices, Redfin said.

From February 2020 to October 2022, the monthly payment for an American family buying the median-priced home increased by roughly 70 percent. Affordability challenges are a major reason why home sales have slowed so dramatically over the last few months, according to Redfin.

“High rates are making buyers rethink their priorities, as many of them can no longer afford the home they want in the location they want,” Washington, D.C., Redfin agent Chelsea Traylor said in a release. “If you had a $900,000 budget a few months ago, rising rates mean it’s now around $700,000, and sellers aren’t dropping their prices enough to make up for the change. So, buyers are searching farther away from the city in more affordable areas or waiting for prices and/or rates to come down before making a move.

“I’m encouraging buyers to think long term,” Traylor added. “Prices are unlikely to fall drastically in the long run, so buying a home now – if you can afford the monthly payment – will still help you build wealth over time, especially if you plan to live in it for several years. Even though rates are high, another advantage of buying now is the lack of competition and opportunity to negotiate with sellers.”

Buyers in North Port, Fla., need to earn $131,535 annually to afford the metro area’s typical monthly mortgage payment of $3,288. That’s up 73.9 percent from $75,659 a year earlier, the biggest percent increase of any major metro. North Port is followed by Miami ($128,892, up 63.7 percent), El Paso, Texas ($64,580, up 63.6 percent), Tampa, Fla., ($101,682, up 62.4 percent) and Cape Coral, Fla. ($104,943, up 60.6 percent).

Lake County, Ill., near Chicago, had the smallest gain in income necessary to afford the median-priced home, though buyers still needed 33.5 percent more than a year ago. Buyers need to earn $402,821 to pay San Francisco’s typical $10,071 monthly mortgage payment, up 33.6 percent from a year ago. It’s followed by San Jose, Calif., ($363,265, up 36.1 percent) and Oakland, Calif. ($247,559, up 36.2 percent).

The incomes buyers need to purchase a home in San Francisco and San Jose are the highest in the country, followed by Anaheim, Calif., ($254,286, up 42.1 percent), Oakland and Los Angeles ($221,592, up 40.7 percent).

Detroit requires the lowest income to afford the area’s median-priced home ($48,435), but that’s still up 42.3 percent from a year ago. It’s followed by Dayton, Ohio ($51,126, up 46.1 percent), Cleveland ($53,817, up 45.7 percent), Rochester, N.Y. ($56,508, up 56.2 percent) and Pittsburgh ($57,853, up 41.7 percent).

 

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