first home welcome matt with two sets of feet welcomes buyers home.

Redfin recently revealed startling findings about the U.S. housing market. To afford the typical starter home, a first-time buyer must earn $64,500 per year. This figure is up 13% from last year due to rising mortgage rates and home prices. The income needed to afford a starter home has risen over 20% in Fort Lauderdale, FL, and Miami — more than anywhere else in the country. In Atlanta, this figure is up 12.4%, with an average downpayment of $68,909 needed to purchase a $260,000 home.

In June, the typical starter home sold for a record $243,000, a 45% increase from before the pandemic. At the same time, mortgage rates climbed to 6.7%.

But what’s behind these figures? A shortage of homes for sale. The competition is fierce, driving up prices. In June, new listings of starter homes plummeted by 23%, the biggest drop since the pandemic’s start. The market shrank by 15%, with starter home sales falling by 17%.

Redfin Senior Economist Sheharyar Bokhari warns that many Americans are getting locked out of the housing market. “The most affordable homes for sale are no longer affordable to people with lower budgets,” he says. This shift may widen the country’s wealth gap.

What about rents? They’re high too. The typical U.S. asking rent is nearing its 2022 peak of $2,053.

Some cities offer relief. San Francisco, Austin, and Phoenix are the only major U.S. metros where buyers need less income than last year to afford a starter home.

But in Florida, the situation is dire. In Fort Lauderdale and Miami, the income necessary to buy a starter home has surged by 28% and 24.8%, respectively. These spikes are the nation’s largest.

Investors are seizing opportunities as well. More than one-third of the country’s starter homes were purchased in cash in May. A record 41% of investor purchases were small homes in the first quarter.

Bokhari adds, “As prices for the most affordable homes continue to climb and rates remain elevated, you have to be wealthy to buy a home–especially if it’s your first one.”

But there’s hope. Some first-time homebuyers can buy a home without a bidding war, and in some metros, prices have come down.

In conclusion, the housing market has never been more challenging for first-time buyers. But with careful planning and an eye on the right markets, the dream of homeownership is still within reach.

For the full report, including charts, tables, and methodology, please visit: Redfin’s Starter Home Report.

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