Acquiring a residence in the United States appears increasingly unattainable. Property values and loan interest rates have remained high since the pandemic's real estate surge, and earnings haven't matched the pace of rising costs.
TL;DR
- Homeownership in the U.S. is increasingly unattainable due to high property values and loan rates.
- Over three-quarters of U.S. homes are out of reach for average families, with a $30,000 income shortfall.
- Aspiring homeowners, especially younger demographics, are finding creative ways to afford a home.
- Pittsburgh remains an exception, offering more accessible housing prices compared to other U.S. cities.
Based on these factors, over three-quarters of residences available for purchase are out of reach for the average family, as indicated by a recent Bankrate analysis that came out on Monday.
“When only a sliver of the market is affordable to the typical household, homeownership starts to feel less like a milestone and more like a luxury,” said Bankrate data analyst Alex Gailey. “It’s no surprise that one in six aspiring homeowners have walked away in the last five years.” Another Bankrate analysis from September shows one in six aspiring homeowners had completely given up on finding a home to buy.
A $30,000 shortfall exists between the average U.S. Household's income and the amount required to purchase a median-priced residence, as per the most recent Bankrate assessment. The typical American family brings in approximately $80,000 annually, based on figures from the U.S. Census Bureau, yet aspiring homeowners require an $113,000 income to manage the cost of a median-value dwelling. The median cost of a home in the United States stands at $447,035, according to a report from Redfin in August report.
However, in certain highly sought-after metropolitan areas within the U.S., prospective purchasers require substantially more income to acquire a home priced at the median. Presented below is a compilation of the top 10 urban centers demanding the greatest annual earnings in the United States, according to Redfin:
- San Jose, Calif.: $413,100
- San Francisco: $393,443
- Anaheim, Calif.: $302,587
- Oakland, Calif.: $244,073
- Los Angeles: $234,619
- San Diego: $227,612
- Seattle: $219,498
- New York City: $213,245
- Nassau County, N.Y.: $207,386
- Boston: $204,465
According to Bankrate's examination, Los Angeles, San Diego, and Boston were identified as cities where finding reasonably priced residences proves most challenging, with New Orleans and Miami also falling into this category.
“For many families, the challenge isn’t just high home prices and elevated mortgage rates,” Gailey said. “It’s that housing shortages across the country have left them with far fewer homes they can afford.”
Nevertheless, a handful of American metropolises offer somewhat more accessible housing prices. Among these are Pittsburgh, St. Louis, Baltimore, Detroit, and Birmingham, Alabama.
Realtor.com recently crowned Pittsburgh as the most affordable city in America, where the median home price is less than $250,000. “In a housing landscape where affordability has eroded nationwide, Pittsburgh remains a rare bright spot where buying a home is still within reach for most households,” Realtor.com senior economic research analyst Hannah Jones said in a statement.
The Washington Post also recently profiled Pittsburgh as having one of the most affordable housing markets in the U.S., giving the example of grocery store deli counter manager Liam Weaver, 30, and professional ballet dancer Issac Ray, 26, who bought their first home in Pittsburgh for just $163,000. Although they spent about $10,000 on renovations, the cost of the house was only about one-third the cost of a median-priced home in the U.S.
However, Pittsburgh, alongside other cities with relatively reasonable prices, stands out as a definite exception in the current real estate landscape.
“Affordability looks very different depending on where you live,” Gailey said. “Some large cities still give median-income households a path to buying a home, while others have become increasingly difficult to break into.”
And certain individuals in the U.S.—especially younger demographics—have been eager to enter the real estate sector, seeking lasting financial security and the same assurance their predecessors achieved through homeownership. Some millennials are carpooling for homes, pooling resources with companions and relatives to acquire a dwelling. Certain members of Generation Z are accepting multiple side hustles solely to accumulate sufficient funds for a down payment.
Realtors working with these clients have also encouraged them to accept the idea of “trading up,” or essentially settling for a cheaper house and one that’s certainly not a dream home. Paul Beaudreau with KW Realty in Burlingame, Calif., previously told Coins2Day he teaches buyers that purchasing a more affordable house first, building equity, then selling it, can be an easier way to save up for a down payment on a dream home down the road.
“While I don’t try to tell my clients to give up on that dream home, I’m trying to explain to them what the path is to get to that dream home,” he said. “Your first home is never your last home, and quite frankly is never your dream home.”
