Buyers needed to earn $70,693 a year to afford the typical U.S. starter home in June, down 1.5% from a year earlier, marking the eighth straight month of improvement, according to a report from Redfin. The typical household now earns about $17,000 more than that threshold, up from a $12,500 gap a year ago, and 71% of starter-home listings are affordable on the median income, up from 65%.
Affordability is improving faster for starter homes than for the market overall because their prices are climbing more slowly, up 1.2% year-over-year in June compared with 2.2% for all homes.
"The first-time buyers who are in the market are already stretching their budgets to afford monthly mortgage payments, so they're hesitant to take on expensive renovations," Redfin Senior Economist Yingqi Xu said. He added that demand is concentrated in move-in-ready starter homes, with fixer-uppers holding less appeal for buyers who have little left over for renovation work. Mortgage rates were near 7% at the end of July, hitting a one-year high.
Read the full report here.
