With the cost of home ownership doubling since last year, the market for starter homes has become untenable for most buyers in all but four major US cities. , according to a recent study published by Point2 . real estate page.
Those cities are:
- Detroit
- Tulsa, Oklahoma
- Memphis, Tennessee
- Oklahoma City
Beginner homes are often considered the first home a family can buy, so they tend to be smaller and cheaper than other homes for sale. But because of the cost of home ownership, starter homes are becoming “tools of legend,” according to Point2.
For the purposes of Point2’s analysis, starter homes are homes valued in the bottom third of all homes available on a given market. To measure affordability, the study followed a popular personal finance rule that mortgage payments should not exceed 30% of a homeowner’s gross monthly income.
Here’s a closer look at four cities where starter homes are truly affordable for the region’s median household incomes.
1. Detroit
Average annual income: $25,004
The income needed to buy a new home starts: 19,103 dollars
Average starting house price: $48,129
2. Tulsa, Oklahoma
Average annual income: $35,039
The income needed to buy a new home starts: $29.521
Average starting house price: 95,481 dollars
3. Memphis, Tennessee
Average annual income: $30,093
The income needed to buy a new home starts: $27,966
Average starting house price: $87,174
4. Oklahoma City
Average annual income: $37.211
The income needed to buy a new home starts: $37,071
Average starting house price: $126,442
Why is the initial cost of home increasing?
Apart from one chronic housing shortage Lawrence Yun, chief economist at the National Association of Realtors, said that before the Covid-19 pandemic, supply constraints and the increasing cost of building materials contributed to the rise in house prices.
And with home prices up nearly 30 percent, “we know for sure that people’s incomes aren’t going up 30 percent,” he said.
The market is likely to remain discouraging, Yun said, at least until mortgage rates fall and home supply catches up to demand. Unfortunately for potential homebuyers, home construction has has slowed down lately due to economic uncertainty.
“The beginner home market has become more and more difficult over the past 20 years,” says Yun. This has created a “social divide” between homeowners and non-hosts, who “simply feel like they can’t keep up.”
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