Economist claims that affordability in housing has completely deteriorated

Welcome to Extreme Investor Network, where we provide unique and valuable insights into personal finance. Today, we are discussing the current state of housing affordability in the U.S. and what it means for potential homebuyers.

According to a recent analysis by Redfin, housing costs in the U.S. are rising faster than median household incomes, making it increasingly challenging for buyers to afford a home. In fact, the typical household would need to earn $113,520 per year to afford the median-priced house, which is 35% higher than the average annual income of $84,072.

“Affordability has just totally collapsed since the pandemic,” noted Chen Zhao, a senior economist at Redfin. The affordability deficit peaked in October 2023 when mortgage rates also reached their highest point. However, there has been a slight improvement since then, with the average household falling short by $29,448 in February 2024 compared to $40,810 in October 2023.

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For price-sensitive buyers, experts suggest considering starter homes, which are among the less expensive and smaller housing options. These homes are becoming increasingly rare as builders have shifted away from constructing entry-level properties. Despite this, there are still some affordable markets in the U.S. where buyers can afford a home without earning six figures, such as Detroit, Cleveland, Pittsburgh, and St. Louis.

Looking ahead, experts anticipate that borrowing costs will decrease as the Federal Reserve plans to reduce interest rates. Additionally, home price growth is expected to soften as inventory levels improve. While conditions may change, now may be a good time for those who are ready and able to purchase a home.

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