Home for sale. Real estate market concept.
(Andy Dean Photography via Shutterstock) Credit: Andy Dean Photography / Shutterstock

Recent data from Redfin, a real estate brokerage, unveiled an escalating challenge for homebuyers. As of now, buying a median-priced home requires an annual income of $114,627, an unprecedented 15% ($15,285) jump from the previous year, and a staggering increase of over 50% since the pandemic’s onset.

In the Hartford area that number drops slightly. Home buyers must make $94,640 to afford a $347,000 home. That’s 30.2% of their income or about $2,366 per month. In the New Haven area that number is $91,367 or 21.8% of their income for $2,284 per month on a $335,000 home.

With the average 30-year fixed mortgage rate peaking at 7.57% – the highest in over two decades – and the typical home’s selling price reaching approximately $420,000 in August, the financial strain on homebuyers is palpable. Despite the dampening effect of surging mortgage rates on demand, the sustained rise in home prices, driven by a continued low inventory, poses significant challenges.

“In a homebuyer’s ideal world, rising mortgage rates would push demand and home prices down enough to make up for high interest payments. But that’s not what’s happening now: Although new listings are ticking up slightly, inventory is still near record lows as homeowners hang onto their low mortgage rates – and that’s propping up prices,” Redfin Economics Research Lead Chen Zhao said in a press release. “Buyers–particularly first-timers – who are committed to getting into a home now should think outside the box. Consider a condo or townhouse, which are less expensive than a single-family home, and/or consider moving to a more affordable part of the country, or a more affordable suburb.”

For context, the standard monthly mortgage payment for homebuyers has reached an all-time high of $2,866, a 20% increase from the prior year. Back in August 2020, a typical monthly payment was just $1,581, reflecting the era of low mortgage rates and yet-to-soar home prices.

The typical American household’s earnings fall short by approximately $40,000 from the necessary income to purchase a median-priced house. The disparity between wage growth and the soaring income required to buy a home has widened, with hourly wages rising by a mere 5% over the past year.

Inventory also plays a role. According to the St. Louis Federal Reserve Bank there were only 4,184 listings available for sale in September. Only about 1,348 were available in Fairfield County. In August, building permits for new private housing were around 519, the latest month for which data is available.

However, not all buyers face these hurdles. Cash buyers remain insulated from the effects of high mortgage rates, and those selling their current homes can leverage their built-up equity to somewhat counterbalance the stinging monthly payments.

In 50 out of 100 analyzed metros by Redfin, homebuyers must command at least a six-figure income to purchase a median-priced home. The Bay Area in California stands out as the most expensive, where homebuyers must earn a staggering $400,000 annually.