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Report: $76K salary needed to buy starter home as down payments surge

The housing crunch is heavily impacting those looking to buy their first home, changing the definition of a "starter home."
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Posted at 11:40 AM, Mar 29, 2024

Are you a first-time homebuyer looking for a starter home? According to new data from Redfin, it takes an income of about $76,000 a year to afford a basic starter home in the U.S. as of February. 

That is up by over 8% in the last year, Redfin said. Four years ago, the typical American needed just over $40,000 a year to afford a starter home. 

One major factor is the amount needed for down payments has increased. The typical down payment on a home reached $56,000 in February, which is up by 24% from one year earlier. 

“Homebuyers are doing whatever they can to pull together a large down payment in order to lower their monthly payments moving forward,” Rachel Riva, a Redfin real estate agent, said in a press release. “The smallest down payment I’ve seen recently is 25%. I had one client who put down 40%.”

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According to Redfin, the typical starter home sold for $240,000 in February, up 3.4% from 2023. Monthly payments for a starter home stood at $1,896 in February, up 8.2% from a year earlier, Redfin said. 

“The pandemic housing-market boom changed the definition of a starter home,” said Redfin senior economist Elijah de la Campa. “A decade ago, many people thought of a starter home as a small three-bedroom single-family house. Now that type of home could cost seven figures, especially in expensive parts of the country. The most affordable homes are much smaller and often require a lot of work to make them habitable—which makes them cost even more."

As homes become more expensive, population and job growth are seen as major reasons why middle-class Americans are struggling to afford to buy a home. 

The National Association of Realtors said existing-home sales surged 9.5% in February, with the median home price going up 5.3% from February 2023 to February 2024. 

"Additional housing supply is helping to satisfy market demand," said NAR chief economist Lawrence Yun. "Housing demand has been on a steady rise due to population and job growth, though the actual timing of purchases will be determined by prevailing mortgage rates and wider inventory choices."