Home prices are so high that nearly half of potential homebuyers say they earn too little to afford a home, a new study shows.
The survey, conducted by Bankrate, included responses from nearly 2,300 adults, 864 of whom were aspiring homeowners. It found that 54% of participants who were interested in purchasing were held back by the fact that they did not earn enough.
Rising home prices and mortgage rates limit the amount homebuyers can afford. The typical price of a home in the United States was $379,100 in January, up 5.1% from the same period a year earlier.
With rates higher than 7%, the typical homebuyer would need to make at least $115,000 to purchase a home, according to a recent analysis by real estate brokerage Redfin. This calculation assumes that the buyer pays 20% down payment and does not spend more than 30% of his income on housing.
More than half of aspiring buyers (51%) also indicated that their current cost of living is too high for them to afford the down payment and closing costs, Bankrate noted.
Other reasons cited for not being able to purchase include credit card debt (18%), not having friends or family to provide financial assistance (15%), and student loan debt (10%).
“For potential homebuyers, debt can be the financial equivalent of suffocating quicksand and potentially prevent entry onto the doorstep of a dream home,” Mark Hamrick, chief economic analyst at Bankrate, said in a statement.
Housing affordability is also getting worse. The United States continues to face a shortage of homes for sale, as homeowners with very low prices are reluctant to sell.
Home prices are also growing faster than wages, which is an “unhealthy” trend, said Lawrence Yun, chief economist for the National Association of Realtors, on a call with reporters discussing the report on existing home sales in January.
“We don't want to see it,” he added. “It's a testament to the housing shortage we face in America.”
Additionally, 20% of aspiring homeowners in the Bankrate survey said they would never be able to save enough to buy a home, with a higher percentage of seniors expressing this sentiment. 36% of baby boomers said they would never be able to save enough to buy a home, as did 28% of Generation Xers.
This is despite the fact that boomers make up the largest share of homebuyers, at 39%, compared to other generations, according to a 2023 report from NAR.
From the archives (November 2023): Housing affordability hits 39-year low, experts say: 'It's fair to expect prices to fall.'
