Median Home Prices Continue to Climb Out of Reach of the Average American

 

Housing prices are just one of the many increasing costs in the modern economy, but recent statistics indicate that the median sales prices of houses sold in the United States has reached a level far out of the reach of the median household income. 

Costs vary across the country, of course, and incomes do, too, but what was once seen as an issue confined to large metropolitan areas and hot real estate markets like Southern California and New York City has spread across much of the United States. 

What are the Average Home Sales Prices in the United States? 

According to economic data published by the Federal Reserve Bank of St. Louis, the median sales price of a home in the United States for the first quarter of 2024 was $420,800. 

While that represents a reduction from the Pandemic-era high of $479,500 in the fourth quarter of 2022, financial market news website Seeking Alpha indicates that the median household income in America is $77,397 as of January 2024. 

Unfortunately, household income of $77K is far below what a family would need to afford a median priced house. Before-tax, the average household brings in around $6,400 per month. Conventional wisdom suggests a mortgage shouldn’t exceed approximately $1,790 per month. 

If we complete some napkin math and take interest rates from the present lending environment, that’s a house worth about $225,000, assuming the borrower has an interest rate right above 7% and offers a down payment of 6%. 

Obviously, a bigger down payment could increase the purchase price of the home, but according to Forbes, the nationwide average for a down payment on a house is only 14%, which wouldn’t reach anywhere near the current nationwide median price. 

Is a Home Affordable Anywhere in the United States? 

Home buyers can still find deals on fixer-uppers and small starter homes in some pockets of the country, and an article from Mortgage Point indicates that there are actually four states where median income is enough to purchase the average house. 

Those states include West Virginia, Ohio, Iowa, and Indiana. The most affordable state is West Virginia, and a median-priced home in that state sells for just $175,272. That equals a mortgage of just over $1,100 a month. 

There are also a handful of large metropolitan areas where it’s possible to purchase a home on median earnings. Further data from Mortgage Point indicates that those metropolitan areas include Pittsburgh, Cleveland, St. Louis, Memphis, TN, Indianapolis, and Birmingham, AL. 

Is It Getting Any Better in Real Estate Hotspots Like Los Angeles? 

If anything, prices in notoriously expensive high cost of living (HCOL) areas like Los Angeles have risen even further beyond the incomes of local citizens, with recent figures suggesting Los Angelinos need income of $249,471 to afford the median priced home in Los Angeles. 

Incredibly, a family living in Los Angeles needs to earn almost 70% more income ($249,471) than the entire price of a median priced house in West Virginia ($175,272). 

According to Realtor.com, the most recent figures for home prices in Los Angeles, California, indicate a median listing price of $1.2 million and a median listing home price per square foot of $718. As far as homes sold, the median sold home price as of April 2024 was a cool $1 million. 

What is the Answer for Future Homeowners in a Tough Real Estate Market? 

It would seem that the real estate industry at large is firmly aware of the high costs associated with purchasing homes in HCOL areas, too, as they’ve adjusted their advertising to suit the current climate. 

Most notably, the aggregate real estate website Zillow recently began broadcasting commercials in Southern California that told buyers they could group up with friends or family and buy a house together. A few decades ago, such a recommendation would have been quite a rarity, but in the modern environment, buyers have had to get creative to realize their dreams of becoming homeowners. 

Although there are certainly pockets of the United States where the median income is enough to start the search for a home, it’s not always realistic to move to a particular geographic area just to purchase a home. 

Facets of life like jobs, family, and schools tie families to a particular state, city, or metropolitan area, so becoming a homeowner often means getting incredibly creative and jumping on opportunities as quickly as possible. It’s anyone’s guess as to whether home prices continue to rise or whether home buyers may experience some relief in the coming years. 

Have questions?

If you or anyone you know has questions about financing or the current housing market, your expert Los Angeles mortgage brokers at Peak Finance are here to help. Contact us today at [email protected].

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