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Report: Only 4 U.S. Cities Where Average American Can Afford a Starter-Home

Peyton Holliday | October 24, 2022 | 4:01pm EDT
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(Getty Images)
(Getty Images)

Only four major cities in the U.S. have starter-home prices that the average American can afford, reported CNBC’s Make It on Oct. 22.

“With homeownership costs doubling since last year, the market for starter homes has become unaffordable for most buyers in all but four major U.S. cities,” said Make It.

Those cities are Detroit, Mich., Tulsa, Okla., Memphis, Tenn., and Oklahoma City, Okla.

Make It pulled its data from a survey by Point2, a real estate website. Point2 said that starter-homes, because of costs, are the “stuff of myths” today.

For Point2’s analysis, “starter homes are those valued in the bottom third of all homes available in a given market,” reported Make It. “To measure affordability, the study follows the common personal finance rule that a mortgage payment shouldn’t exceed 30% of a homeowner’s gross monthly income.”

(Screenshot)
(Screenshot)

The survey looked at the median price of a starter-home and renter households’ median incomes in the 50 largest U.S. cities. In only four cities did the numbers show starter-homes were affordable, which the data below reveal:

Detroit, Michigan

Median annual income: $25,004

Income needed to afford a starter home: $19,103

Median starter home price: $48,129

Tulsa, Oklahoma 

Median annual income: $35,039

Income needed to afford a starter home: $29,521

Median starter home price: $95,481

Memphis, Tennessee 

Median annual income: $30,093

Income needed to afford a starter home: $27,966

Median starter home price: $87,174

Oklahoma City, Oklahoma 

Median annual income: $37,211

Income needed to afford a starter home: $37,071

Median starter home price: $126,442

Some of the cities where starter-homes are not affordable based on a renter’s income vs. income required include Los Angeles, New York, Oakland, San Jose, Miami, San Diego and San Francisco. In Los Angeles, there is a 70% gap between the renter’s income and the income required. In San Francisco, it’s a 60% gap.

(Source: Point2)
(Source: Point2)

Concluding with remarks from Lawrence Yun, the chief economist at the National Association of Realtors, CNBC’s Make It reported, “The starter home market has become increasingly difficult over the past 20 years,” says Yun. This has created a “social divide” between homeowners and non-homeowners, who “simply feel like they cannot catch up.”

h/t Make It

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