According to a report released by Redfin this week, prospective homebuyers need to make $114,627 annually to purchase a moderate-priced home. This is a 15 %-year increase from 2022 and a 50% increase since the beginning of the pandemic.
Mortgage rates, which have hit 8% on Oct. 18, are the major contributing factor to the increase in home prices. This is a 5% increase since last year.
Monthly mortgage rates have reached an all-time high of $2800.As of July, one-fourth of mortgage payers paid more than $ 3,000 monthly. According to CEIC data, the average monthly earnings of U.S. households were $4654. On average, Americans are spending more than 60 percent of their earnings on mortgage payments.
“In a homebuyer’s ideal world, rising mortgage rates would push demand and home prices down enough to make up for high-interest payments. But that’s not what’s happening now: Although new listings are ticking up slightly, inventory is still near record lows as homeowners hang onto their low mortgage rates–and that’s propping up prices,” said Redfin Economics Research Lead Chen Zhao.”
Zhao encourages prospective homebuyers to look for less expensive options such as condos and townhouses or consider moving to a suburb or a more affordable part of the country.
Renters are not faring much better. New York, Chicago and Los Angeles have seen significant increases in rent prices. In New York, landlords require renters to make 40 to 45 more than their rent to qualify. The average monthly rent in Manhattan is $4,400, meaning renters would need to earn approximately $176,000 annually to be eligible to rent.
“Renting is more affordable than borrowing to buy a home in most metro areas,” Daryl Fairweather, Redfin’s chief economist, told Fortune.
According to Redfin, only four major markets are less expensive to buy than to rent: Detroit, Philadelphia, Cleveland and Houston.
RELATED CONTENT: Founder of Black Woman-Owned Mortgage Company Helping Homebuyers in Philadelphia Get $10K Grants
