Half of prospective homebuyers said their income was too low to afford it.
House prices are so high that almost half of would-be home buyers say they earn too little to afford a home, according to a new survey.
A survey conducted by Bankrate involved nearly 2,300 adults, 864 of whom were aspiring homeowners. It found that 54% of respondents interested in purchasing were hesitant due to the fact that they would not earn enough money.
Rising home prices and mortgage rates are limiting what homebuyers can afford. In January, the price of a typical home in the U.S. was $379,100, up 5.1% from the same period last year.
With interest rates above 7%, the average homebuyer would need to earn at least $115,000 to purchase a home, according to a recent analysis by real estate brokerage Redfin. This calculation assumes the buyer puts 20% down and spends no more than 30% of their income on the home.
Additionally, more than half (51%) of would-be buyers indicated that their current cost of living is too high to afford the down payment and closing costs, Bankrate noted.
Other reasons for not being able to make purchases included credit card debt (18%), not having friends or family to provide financial support (15%), and student loan debt (10%).
“For potential homebuyers, debt can be both financially suffocating and a barrier to entry into their dream home,” Mark Hamrick, senior economic analyst at Bankrate, said in a statement.
Housing affordability is also worsening. The U.S. continues to face a shortage of homes for sale as homeowners hesitate to sell at rock-bottom prices.
Home prices are also rising faster than wages, an “unhealthy” trend, Lawrence Yun, chief economist at the National Association of Realtors, said on a call with reporters about the January existing home sales report.
“We don’t want to see that,” he added. “This is evidence of the housing shortage we face in America.”
Additionally, 20% of aspiring homeowners in the Bankrate survey said they would not be able to save enough to buy a home, with a higher percentage of older respondents expressing this sentiment. 36% of baby boomers say they will never be able to save enough to buy a home, as do 28% of Gen Xers.
This is despite the fact that boomers make up the largest share of homebuyers compared to other generations, at 39%, according to a 2023 report from NAR.
From the archives (November 2023): Home affordability has hit a 39-year low. “It is fair to expect prices to weaken,” the expert said.
