How much money you need to make to afford a median-priced home in Minnesota
MINNEAPOLIS (FOX 9) - To some, it may not come as a surprise, but high mortgage rates, along with high home prices, mean that buying a home in the U.S. is becoming harder for many Americans.
Now, a new report is showing just how much money someone needs to make in order to afford a median-priced home.
Here's what to know about the numbers.
What does the report say?
The report, which was published by Redfin, shows that overall, the income an average homebuyer needs in order to afford a median-priced U.S. home has gone up 15%, or $15,285, from a year ago, and up by over 50% since the start of the COVID-19 Pandemic.
In that same time frame, figures show that wages only went up by 5% for the average worker.
For the report, ‘affordable’ is defined as situations where a monthly home mortgage payments do not exceed 30% of a homebuyer's income.
Besides national numbers, the report also listed the income needed to afford a median-priced home in a number of U.S. cities, including one city in Minnesota.
What do the numbers say about Minnesota?
For Minneapolis, the report states that a homebuyer will need to make at least $103,640 a year in order to afford a median-priced home, an increase of 19.5% from a year ago.
RELATED: This is how much money you need to make to buy a home in Twin Cities metro
The median monthly mortgage payment in Minneapolis is $2,591, while the median home sale price in Minneapolis is $380,000.
Did the report mention anything else about home affordability?
According to the report, high mortgage rate means that in every major metropolitan area, people need to earn more now to buy a home when compared to years before, even in places where home prices have declined.
The same report also states that a typical American household earns about $40,000 less than the income needed to buy a median-priced home.
What's causing all this?
According to the Redfin report, home inventory remains near record lows as homeowners hang onto their low mortgage rates, and that is helping to prop up home prices.
In a separate article published by The Associated Press earlier in October, the CEO for brokerage franchisor Century 21, Mike Miedler, said that in the decade after the Great Recession, the housing market has experienced underbuilding, with a shortage of 3.5 million to over 5 million homes.
"We’re kind of going into a macro supply and demand issue, which is you’ve got the largest generations in U.S. history — millennials and Gen-Z — entering their main homebuying years, and we just don’t have enough property to sell and for people to move into," said Miedler.
In addition, Miedler said homebuilders are developing more and more so-called ‘high-end’ properties, and not enough properties for first-time homebuyers.
What can first-time homebuyers do to afford a home?
On their website, NerdWallet listed a number of advice for first-time homebuyers. They include:
- Saving early for down payments, closing costs, and move-in expenses
- Figure out how much you can safely spend on a house before starting to shop
- Check your credit
In addition, the website noted that people should look at various mortgage options, including FHA, USDA, and VA loans (whichever is applicable), as well as first-time homebuyer assistance programs.