by Evie Fordham
Starter home affordability is the worst it has been since the Great Recession because of increasing mortgage rates and other factors.
First-time home buyers had to spend an average of 23 percent of their annual income to purchase a “typical entry-level home,” according to Bloomberg. Home prices that increased faster than individuals’ incomes contributed to the drop in affordability, according to Bloomberg.
First-time home buyers had to spend 21 percent of their annual income to afford starter homes in summer 2017, according to Bloomberg.
The 2018 numbers come as the housing market is “cooling” to its weakest point in more than two years, Bloomberg reported.
Higher mortgage rates are contributing to the affordability problem, too. Although mortgage rates are about 2 percentage points lower than they were in the 2000s, they have been on the climb in 2018, according to NerdWallet.
It may be hard to budget for putting money down on a starter home in the U.S. in general, but in metropolitan areas like San Francisco and New York, becoming a homebuyer can extremely expensive. The median household “needed about 65 percent of its income to buy a home” in the second quarter of 2018, according to Bloomberg.
That number compares to 55 percent in Miami and 59 percent in Los Angeles.
The average starter home has become less dream house and more fixer-upper in the past six years, reported Trulia. The average 2018 starter home is nine years older than the average 2012 starter home. Average square footage has shrunk by two percent in the last six years.
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