November 27, 2024
Are you struggling to buy a house?
First – you’re not alone. And second – cutting out Starbucks and avocado toast is not going to help you get there. So you can tell your boomer relatives who pester you at Thanksgiving – they can either watch this video or they need to have a seat and zip it because a can of beans and a $50,000 IOU isn’t going to cut it anymore.
You actually need a minimum six figure salary. And you’ll need make even more if you live in several specific cities. That’s according to a new detailed report that focuses on housing affordability in the United States. I’m going to get into all of that in this video.
And before I tell you what the report found — I want you to brace yourself because the report from oxford economics found that housing affordability has dropped significantly over the last five years in every major metro area in the United States. But I’m also going to tell you where the most affordable homes are currently located.
According to the report – in order to afford a new single-family home and pay both property taxes and home insurance costs on average your total household income needs to be at least $107,700 dollars. That income is based on the housing market numbers in the third quarter of 2024. And if …a.. Nearly $108,000 annual salary seems like a lot to you – it is. The report found it’s actually twice the household income that you needed to purchase a home just five years ago in the third quarter of 2019. And don’t feel bad if you’re not there – oxford economics says only one-third of us households earned enough to afford a home in the third quarter of 2024. Back in the third quarter of 2019, the report says nearly two-thirds of US households were able to afford a home. Back then the salary needed was $56,800.
So what’s happening? What’s causing this housing to be so unaffordable? Well – in the third quarter the report says yes it’s true home prices themselves were about 50% higher than they were in 2019. In the third quarter of 2024 the median home price in the United States was almost $408,900. While that’s a lot – the report found the real affordability killer was the increase in mortgage rates from 3.7% to 6.5%, combined with higher property taxes and home insurance rates. Oxford economics defined home affordability by assessing whether a home’s monthly payments exceed 28% of a person’s income.
Don’t forget we had a pandemic. Tons of people moved into bigger homes and locked in super low mortgage rates. Which they do not want to give up. Then big corporations and conglomerates bought up all the single-family starter homes to rent them out and they’re not giving up those cash cows. And in case you missed it – we have a significant housing shortage in this country. All that combined with the demand of the rest of us trying to get a home has driven up the price of both new and existing homes. Not to mention the increase in size and scope of natural disasters like wildfires and hurricanes which has jacked up the price of insurance or even worse – caused insurance companies to just not offer insurance on those properties anymore. Needless to say – it’s a complicated problem.
At the beginning of this video I mentioned housing is becoming less affordable for folks in specific states. So now let’s talk about where. One is no surprise and another may surprise you.
The report found that four of the top five cities with least affordable homes were in California. No surprise. By far literally – not even close – the least affordable homes were in San Jose California where you have to have a nearly half a million dollar annual salary to afford a place to live ($461,000). The other three cities with the least affordable homes in California were San Francisco, Los Angeles and San Diego.
Now this may surprise you. The report found the state with the biggest decline in housing affordability since 2019 – was Florida. Seven of the top 20 cities that saw the biggest affordability decline included Ocala, Panama City, Port St. Lucie, Lakeland, Punta Gorda, Naples, and Deltona. The report found homes in those cities became more unaffordable because of the number of retirees who moved into the state.
Lastly let’s talk about the most affordable cities in the third quarter of 2024. The report found nine of the 20 more affordable metros were in the Midwest. But the Midwest isn’t immune to unaffordable homes. According to the report, between 2019 and 2024 housing prices definitely went up – and the income needed to afford those Midwest homes doubled. But if you choose to live in Cleveland, Louisville and Detroit your annual income can be much less than that $107,700 average income needed for the rest of the country. Here are all the other cities where the income needed to afford a home is less than that average.
Read the report from Oxford Economics here.
