For buyers entering the housing market for the first time, the median household income isn’t enough, according to a new RealEstate.com report.
Buying a home is one of the most expensive transactions most Americans will make in their life, and breaking into the housing market can be especially difficult for first-time buyers. A new RealEstate.com analysis finds that the typical first-time buyer earns more than the median household income, helping them afford to buy a home.
The median income for a first-time buyer is $72,500, compared with the national median household income of $60,700. The difference in income for first-time buyers is more pronounced when compared with their peers who didn’t buy, who have a median income of $42,500, according to the 2018 Zillow® Group Report on Consumer Housing Trends.
Most buyers rely on savings to finance a down payment, but the second-highest source for a down payment comes from the proceeds from a previous home salei. Buyers entering the market for the first time don’t have this resource, though, so a higher income helps them set aside enough for a down payment.
First-time home buyers tend to put down slightly smaller down payments, with a median down payment of 14.5 percent of a home’s price, rather than the traditional 20 percent down payment. By comparison, 58 percent of repeat buyers put down at least 20 percentii. With this smaller down payment, first-time buyers earning the median income could afford to buy a $338,000 home, meaning they could buy about 68 percent of available homesiii.
“Buying a home, especially for the first time, is a major step in a lot of people’s lives,” said Justin LaJoie, RealEstate.com General Manager. “But with home prices climbing ever higher, and inventory yet to see sustained increases, getting a foot in the door is incredibly difficult for new buyers who can’t rely on selling another home to come up with a down payment.”
These are the markets where first-time buyers can afford the largest and smallest shares of listingsiv:
|
Largest Share of Listings Affordable |
Smallest Share of Listings Affordable |
||||
|
Metropolitan Area |
Share Affordable |
Metropolitan Area |
Share Affordable |
||
| 1. | St. Louis, MO | 83.7% | 1. | Los Angeles, CA | 25.4% |
| 2. | Pittsburgh, PA | 81.7% | 2. | San Jose, CA | 28.4% |
| 3. | Hartford, CT | 81.5% | 3. | San Diego, CA | 30.4% |
| 4. | Buffalo, NY | 80.7% | 4. | San Francisco, CA | 34.1% |
| 5. | Oklahoma City, OK | 79.7% | 5. | Miami, FL | 39.7% |
Zillow Group designed the RealEstate.com search experience to help first-time buyers trying to understand what they can afford with their monthly housing budget. Home shoppers can search RealEstate.com for homes based on the “All-In Monthly Price,” which lets people search based on their monthly budget and down payment savings amount. It includes mortgage payments, property taxes and utilities.
| Metropolitan Area | Median First- time Buyer Income |
Maximum Price Affordable to Median First- time Buyer |
Share of Homes Affordable to Median First- time Buyer |
| United States |
$ 72,500 |
$ 338,100 |
67.7% |
| New York/Northern New Jersey |
$ 95,800 |
$ 446,800 |
41.3% |
| Los Angeles-Long Beach-Anaheim, CA |
$ 90,000 |
$ 419,600 |
25.4% |
| Chicago, IL |
$ 87,000 |
$ 405,800 |
72.0% |
| Dallas-Fort Worth, TX |
$ 88,600 |
$ 413,000 |
66.5% |
| Philadelphia, PA |
$ 88,000 |
$ 410,300 |
76.6% |
| Houston, TX |
$ 84,900 |
$ 396,000 |
70.1% |
| Washington, DC |
$ 132,500 |
$ 617,800 |
72.2% |
| Miami-Fort Lauderdale, FL |
$ 70,700 |
$ 329,800 |
39.7% |
| Atlanta, GA |
$ 86,700 |
$ 404,500 |
70.7% |
| Boston, MA |
$ 109,900 |
$ 512,500 |
52.0% |
| San Francisco, CA |
$ 133,200 |
$ 621,100 |
34.1% |
| Detroit, MI |
$ 73,800 |
$ 344,300 |
74.6% |
| Riverside, CA |
$ 79,100 |
$ 368,800 |
57.1% |
| Phoenix, AZ |
$ 79,200 |
$ 369,500 |
64.1% |
| Seattle, WA |
$ 107,900 |
$ 503,100 |
47.6% |
| Minneapolis-St Paul, MN |
$ 96,500 |
$ 450,200 |
73.3% |
| San Diego, CA |
$ 96,600 |
$ 450,800 |
30.4% |
| St. Louis, MO |
$ 78,700 |
$ 367,200 |
83.7% |
| Tampa, FL |
$ 70,700 |
$ 329,800 |
69.3% |
| Baltimore, MD |
$ 107,100 |
$ 499,300 |
77.6% |
| Denver, CO |
$ 98,400 |
$ 458,800 |
51.4% |
| Pittsburgh, PA |
$ 75,100 |
$ 350,400 |
81.7% |
| Portland, OR |
$ 94,100 |
$ 438,700 |
48.8% |
| Charlotte, NC |
$ 83,600 |
$ 390,000 |
71.8% |
| Sacramento, CA |
$ 87,200 |
$ 406,800 |
45.7% |
| San Antonio, TX |
$ 77,700 |
$ 362,200 |
73.4% |
| Orlando, FL |
$ 72,500 |
$ 337,900 |
63.4% |
| Cincinnati, OH |
$ 79,500 |
$ 370,600 |
78.1% |
| Cleveland, OH |
$ 68,500 |
$ 319,300 |
79.2% |
| Kansas City, MO |
$ 81,000 |
$ 377,600 |
72.4% |
| Las Vegas, NV |
$ 73,800 |
$ 344,200 |
55.3% |
| Columbus, OH |
$ 79,400 |
$ 370,300 |
71.2% |
| Indianapolis, IN |
$ 75,000 |
$ 349,700 |
73.3% |
| San Jose, CA |
$ 150,900 |
$ 704,000 |
28.4% |
| Austin, TX |
$ 99,200 |
$ 462,600 |
75.2% |
Zillow Group
i https://www.zillow.com/
ii https://www.zillow.com/report/
iii Assuming a 30-year fixed rate mortgage with a 5 percent rate
iv Among the 50 largest U.S. metros
SOURCE Zillow Group
