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Listen to Fed Speakers Carefully to Get Ahead of Next Rate Decision

Here's How Much You Need to Make to Buy a Home

It's more than many people make, but perhaps less than you think, but it's important to know the income you need in order to buy a house.
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With home prices remaining elevated and mortgage rates continuing to soar, homes are becoming less and less affordable.

"The median income needed to buy a typical home has risen to $88,300, almost $40,000 more than it was prior to the start of the pandemic, back in 2019," said Lawrence Yun, chief economist of the National Association of Realtors (NAR).

If you’ve bought a home recently, you know what it’s like to meet your mortgage obligations. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $1,840 in the third quarter, NAR reported.

That represents a trivial rise from $1,837 in the second quarter. But the figure soared 50%, or $614, from $1,223 a year ago.

Families typically spent 25% of their income on mortgage payments in the third quarter, down slightly from 25.3% in the second quarter, but way up from 17.2% a year ago.

Residential Homes Lead JS

First-Time Home Buyers Face a Tough Market

The burden is particularly severe for first-time buyers. For a typical starter home valued at $338,700 with a 10% down-payment loan, the monthly mortgage payment registered $1,808 in the third quarter.

That barely changed from $1,807 in the second quarter, but it constitutes an increase of 49%, or $598 from $1,210 a year ago.

First-time buyers typically spent 37.8% of their family income on mortgage payments, up from 36.8% in the second quarter. A mortgage is considered unaffordable if the monthly payment (principal and interest) amounts to more than 25% of the family's income.

Home Prices Have Been Falling

Home prices have been declining month to month. The median existing home-sales price registered $384,800 in September, down 7% from a record high of $413,800 in June. But the latest figure is still up 8.4% from $355,100 a year ago.

At the same time, mortgage rates continue to climb, as the Federal Reserve raises interest rates. The 30-year fixed-rate mortgage averaged 7.08% in the week ended Nov. 10, up from 6.95% a week earlier and from 2.98% a year earlier.

“If you talk to longtime locals in Utah, Boise, and Phoenix, they are experiencing being completely priced out of the housing market due to a double whammy of higher prices and higher mortgage rates,” Zillow economist Jeff Tucker told Grid news service.

“Homeownership itself becomes out of reach at higher interest rates for a large swathe of the middle class in those markets.”

Meanwhile, at the other end of the income spectrum, if you really have money to blow, you might consider buying a winter home.

Vacasa, a vacation rental management platform, compiled a list of the Top 10 places for buying a winter vacation home. Here are the top five

  1. Wallowa Lake, Ore. Home price: $282,237
  2. Poconos, Pa. Home price $298,067
  3. Bear Lake, Utah. Home price: $377,061
  4. South Fork, Colo. Home price:$387,173
  5. Banner Elk, N.C. Home price: $457,608,