Despite home prices continuing to outpace the budgets of many Americans, there are still major U.S. cities where the average price is under $300,000, according to a Redfin analysis.
With mortgage rates persistently flirting with 7%, the dream of homeownership has slipped further away from potential buyers who have watched prices rocket higher over the past decade.
A homebuyer now needs to earn at least $114,000 a year to afford a $431,250 home – the national median listing price in April, according to data released Thursday by Realtor.com
The analysis assumes that a homebuyer will make a 20% down payment, finance the rest of the purchase with a 30-year fixed-rate mortgage, and that the buyer’s housing costs won’t exceed 30% of their gross monthly income — an often-used barometer of housing affordability.
Based off the latest U.S. median home listing price, homebuyers need to earn $47,000 more a year to afford a home than they would have just six years ago. Back then, the median U.S. home listing price was $314,950, and the average rate on a 30-year mortgage hovered around 4.1%.
So how can a first-time home shopper land a decent house that’s over $100,000 below the national average? Being open to moving to one of the following cities would be a good first step, according to Redfin:
The numbers, based on Redfin’s median sale prices for the 91 U.S. metros with the highest populations, show that even these relatively cheap cities have seen home values rise dramatically over the last 10 years. Baton Rouge has seen the smallest price increase (+49.6) while Detroit has seen the greatest jump (158.5%).
It’s not all bad news for prospective homebuyers across the country, however.
Home prices are rising much more slowly than during the pandemic housing market frenzy. The national median sales price of a previously occupied U.S. home rose 2.7% in March from a year earlier to $403,700, an all-time high for March, but the smallest annual increase since August.
In April, the median price of a home listed for sale rose only 0.3% from a year earlier, according to Realtor.com.
Buyers who can afford current mortgage rates have a wider selection of properties now than a year ago.
“Sellers are becoming more flexible on pricing, underscored by the price reductions we’re seeing, and while higher mortgage rates are certainly weighing on demand, the silver lining is that the market is starting to rebalance,” said Danielle Hale, chief economist at Realtor.com. “This could create opportunities for buyers who are prepared.”
The Associated Press contributed to this report.
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