The monthly housing payment for the typical U.S. starter home that sold in July was $1,981, up 4.4 percent from a year earlier, according to a new report from Redfin.

That means homebuyers must earn $79,252 annually to afford the typical starter home, also up 4.4 percent year-over-year and just a few hundred dollars shy of last October’s all-time high.

The average mortgage rate was 6.85 percent in July, down slightly from its springtime peak but still more than double pandemic-era lows. The typical starter home sold for a record $250,000 in July, up 4.2 percent year-over-year.

“There are neighborhoods here that are both desirable and affordable, with homes selling in the $150,000 to $350,000 range. But first-time buyers are struggling because those homes typically get at least five offers,” Ben Ambroch, a Redfin Premier agent in Milwaukee, said in a release. “I recently listed a house for $210,000 and it received several bids, one of which included an offer to buy the seller pizza every Friday night until the deal closed. We ended up going with a higher offer, but that’s an example of the creativity we’re seeing as buyers compete for starter homes.”

Rising prices have pushed many middle-income Americans to buy starter homes and pushed many lower-income households out of the market altogether. The typical U.S. household earns an estimated $83,966, just barely more than necessary to afford a starter home. But many people in the market for starter homes make less than the median U.S. income. A family earning 80 percent or less of the median income — $67,173 or less — cannot afford the typical starter home. Wages are increasing, but not as fast as the income needed to buy a starter home: Average hourly earnings were up 3.6 percent year-over-year in July.

Roughly 70 percent of U.S. starter homes are affordable to the median-earning household, down from about 73 percent a year ago and near the record low, Redfin added.

With housing affordability so strained, starter homes are a hot commodity; lower-income families, middle-income families and investors are all vying for them. Pending sales of starter homes rose 10 percent year-over-year in July to their highest level in nearly two years, while they dropped in all other price tiers. Rising demand for starter homes is one reason prices are at a record high.

In half of the 50 most populous U.S. metros, a family earning the local median income can’t afford to buy a starter home.

The affordability gap for starter homes is biggest in California. In both Anaheim and Los Angeles, a family would need to earn twice the local income to afford a starter home. Anaheim’s median income is $122,192; a family needs to earn $251,302 to afford the typical starter home. In Los Angeles, the median income is $93,197 and a household needs to earn $184,477 for a starter home. The gap is only slightly smaller in San Diego, San Francisco and San Jose.

It’s tough to afford even a starter home in much of California because even though residents tend to earn more money than some other parts of the country, it’s not enough to afford the state’s ultra-high home prices. Among the pool of starter homes on the market in many California metros, virtually none are affordable to someone earning the median income, according to Redfin.

“Homes in the Bay Area are so expensive that even many high-earning tech employees have been priced out of the area, so they’re looking at neighboring cities,” said Craig Pellegrini, a Redfin Premier agent in the San Jose area. “I have one client who wanted to buy in Palo Alto, but they can’t afford it anymore so they’re looking in Sunnyvale and Santa Clara. That’s pricing out a lot of lower earners in those neighboring cities completely.”