The income required to afford a starter home in the U.S. has increased by more than 80% since 2019, a new Realtor.com report indicates, highlighting persistent affordability challenges for aspiring homeowners nationwide.
First-time homebuyers now need an annual household income of approximately $78,000 to purchase a typical starter home, a significant jump from the roughly $43,000 needed in 2019. This surge in required income has far outpaced wage growth, making it increasingly difficult for many to enter the housing market.
"First-time buyers aren't sitting on the sidelines because they don't want to own a home—it's because, for many of them, it's just not possible right now," Hannah Jones, senior economist at Realtor.com, told Fox News Digital.
While the supply of starter homes has seen a slow recovery from pandemic-era lows, elevated mortgage rates, higher home prices, and a continued shortage of affordable listings continue to sideline many potential buyers. The recovery in inventory has been uneven across different regions of the country.
Regional Housing Market Differences
A substantial increase in new construction has contributed to the strongest recovery in starter home inventory in the South and West. In these regions, starter home prices have also seen declines from their pandemic peaks. The South, in particular, has added nearly 170,000 affordable listings since 2022, with prices dropping 3.5% from their peak. The West has experienced a 7.3% decrease in starter home prices from their 2022 peak, with markets like Denver, Phoenix, and Colorado Springs leading this trend.
"Buyers in parts of the South and West are seeing more homes in their price range, while much of the Midwest remains relatively affordable compared with the rest of the country," Jones stated.
The Midwest remains the most affordable region in terms of absolute dollar amounts, although affordability there is also beginning to erode as prices climb. Over half of homes listed in the Midwest are still priced below $350,000, offering buyers more options than in other parts of the nation.
In contrast, the Northeast has seen prices move in the opposite direction. The typical starter home in the Northeast now costs around $444,000, with prices increasing by 12.6% since 2022 alone.
Persistent Barriers to Homeownership
Despite improvements in inventory in some areas, many first-time buyers remain priced out of the market. Data indicates that purchases of homes priced below $350,000 fell by approximately 10% in April compared to the previous year. This suggests that higher borrowing costs, in addition to limited supply, are a significant obstacle for prospective homeowners.
Many potential buyers are reportedly waiting for mortgage rates to decrease or for a greater number of listings to become available before committing to purchasing a home. Housing experts suggest that increasing homebuilding and reducing regulatory barriers are key strategies to improve housing affordability.