Story at a glance
- Monthly mortgage payments have risen to $2,682 for the typical U.S. home.
- A new report found buyers in 45 major U.S. metros must earn at least $100,000 annually to afford a typical home.
- Buyers seeking to purchase a home in San Francisco need an annual income of $402,821 to afford a median priced home.
Sky-high mortgage rates have significantly increased the amount of money buyers need to earn annually to afford a typical home in the U.S., according to a new report.
The report from the real estate company Redfin revealed that a homebuyer must earn $107,281 per year to afford monthly mortgage payments that have risen to $2,682 for the typical U.S. home.
This marks a 45.6 percent increase from the amount needed to afford a typical home a year ago. Last year a potential buyer needed an annual income of $73,668.
“High rates are making buyers rethink their priorities, as many of them can no longer afford the home they want in the location they want,” Washington, D.C., Redfin agent Chelsea Traylor, said in a media release.
“If you had a $900,000 budget a few months ago, rising rates mean it’s now around $700,000 — and sellers aren’t dropping their prices enough to make up for the change,” Traylor continued. “So, buyers are searching further away from the city in more affordable areas or waiting for prices and/or rates to come down before making a move.”
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The report found buyers in 45 major U.S. metros must earn at least $100,000 annually to afford a typical home.
Most U.S. metros where monthly costs increased the most are in the Sun Belt region of the country, where buyers moved for lower costs of living during the pandemic.
But homebuyers in San Francisco and San Jose need to earn the most to afford the typical home.
Buyers seeking to purchase a home in San Francisco need an annual income of $402,821 to afford a median priced home in the city, while prospective buyers in San Jose need to make $363,265 per year.
Mortgage rates are currently hovering near 7 percent amid the Federal Reserve’s effort to fight inflation through a series of interest rate hikes.
Since the U.S. central bank began its aggressive interest rate increases, mortgage rates have more than doubled. The rate for a 30-year fixed-rate mortgage rose above 7 percent again last week after falling slightly a week earlier.
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