Home prices are so high that nearly half of would-be buyers say they earn too little to afford a home, according to a new survey.
The survey, conducted by Bankrate, included responses from nearly 2,300 adults, 864 of them aspiring homeowners. It emerged that 54% of those interviewed who were interested in purchasing were held back by the fact that they did not earn enough.
Rising home prices and mortgage rates are limiting how much 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 above 7%, the typical home buyer would need to earn at least $115,000 to afford a home, according to a recent analysis by real estate brokerage Redfin. This calculation assumes a buyer puts down 20% and spends no more than 30% of their income on housing.
More than half of would-be buyers (51%) also noted that the current cost of living is too high to afford a 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 prospective homebuyers, debt can be the financial equivalent of quicksand, which can suffocate and potentially block entry over the threshold of a dream home,” Mark Hamrick, senior economic analyst, said in a note of Bankrate.
Housing affordability is also worsening. The United States continues to face a shortage of homes for sale as owners of ultra-low-priced homes hesitate to sell.
Home prices are also growing faster than wages, an “unhealthy” trend, Lawrence Yun, chief economist for the National Association of Realtors, said on a call with reporters discussing January’s existing home sales report.
“We don’t want to see that,” he added. “It is a testament to the housing shortage we are facing in America.”
Additionally, 20% of would-be homeowners in the Bankrate survey said they would never be able to save enough to buy a home, with higher percentages of older respondents expressing this sentiment. Thirty-six percent of baby boomers said they would never be able to save enough to buy a home, as did 28 percent of Gen 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 a 39-year low. “It is fair to expect prices to weaken,” says the expert.