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Report says homebuyers need to earn $47,000 more than in 2020

Mortgage rates have fluctuated since 2020, now around 6.9% for a 30-year-fixed, and that's a two-month high, according to Freddie Mac.
Report says homebuyers need to earn $47,000 more than in 2020
Posted at 4:50 PM, Mar 05, 2024
and last updated 2024-03-05 16:51:32-05

Home shoppers need to make more than $106,000 a year to comfortably afford an average home in the U.S., which Zillow said is 80% more than in January 2020.

Now, hopeful buyers are using creative ways to try to make their way into homeownership. Rachel Bingham, who is looking for her first home in Colorado, has been in the market for three years. 

"I would love to buy a house but, you know, due to my income, I'm limited to a specific market or townhome," Bingham said. "Honestly, a townhome condo is kind of my budget and I have a great salary. I work in tech, but this is just kind of where this inflated economy has put me." 

The real estate marketing company Zillow said the monthly mortgage on a typical home is nearly double what it was in January of 2020, now around $2,200.

"So, you really have to be strategic in buying," said Rachel DiMatteo, a Realtor in Colorado. "As opposed to four years ago, maybe even 10 years ago, you can buy your first home and it's a lot easier. Today it's a lot harder, especially with the wages kind of just creeping up but not to exactly where they need to be."

Mortgage rates have fluctuated since 2020, now around 6.9% for a 30-year-fixed, and that's a two-month high according to Freddie Mac.

Meanwhile, home values have risen about 42% in that time. And Zillow reported household earnings have not kept up with the increasing cost of getting a home. 

The company said you need an income of around $106,500 to afford the mortgage on a typical home. So, how are first-time homebuyers doing it? Zillow said half of first-time homebuyers say they got at least part of their down payment as a gift or a loan from family or friends.

"Especially as a first-time homebuyer, you don't have to put 20% down," DiMatteo said. "You can have anywhere between 2%-5% down. Another thing you can do is ask the seller for help. So, you can say, 'Hey, I'm interested in this home and here's my offer and also we'd like to ask for some concessions to help for the down payment on the home.'"

It also depends on where you live. Places like Pittsburgh, Cleveland and Memphis require less than six-figure incomes to comfortably afford a home.

It'll take much more in the West — in places like San Jose and San Francisco, it's somewhere between $330,000 to $450,000 a year.

Realtors like DiMatteo said that buying a first home is still worth considering as they believe prices will continue to rise in the future. 

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