Housing expert: Buyers need $30,000 more in income to afford a home today

Even as the housing market begins to show signs of cooling off, sellers are still largely in the driver’s seat and affordability issues continue.

U.S. home prices jumped 20.6% in March from the year before, according to the latest S&P CoreLogic Case-Shiller national home price index, representing the largest year-over-year increase in the index’s 35-year history. At the same time, mortgage rates remain above 5% or nearly 2 percentage points higher than at the start of the year.

“It is that first-time homebuyer who is really affected by the spike in interest rates,” Mike Miedler, CEO of Century 21, recently told Yahoo Finance Live (video above). “If you look back a year ago, you need about $30,000 to $33,000 more household income in order to afford the home at today's interest rate at the median price.”

The median existing-home price rose to $391,200 in April, up from $340,700 in April 2021, according to the National Association of Realtors (NAR), even though sales slipped 5.9% from a year ago. Homebuyers now need almost double the down payment.

LONG BEACH, CA - SEPTEMBER 15: A house for sale in the Los Cerritos neighborhood in Long Beach on Thursday, September 15, 2016.  The Los Angeles area is home to 12 communities listed among the 100 priciest places to buy a common-sized home, a new survey shows. Long Beach is No. 50. (Photo by Scott Varley/Digital First Media/Torrance Daily Breeze via Getty Images)
Credit: Getty Images

And that's if they can find a home in the first place, given the lack of homes for sale.

“Inventory is in a low spot where pending inventory is down about 17% [and] we have about 2.2 months of supply [when] a normal marketplace for residential housing is about six months of supply,” Miedler said.

While bidding wars are slightly less common, they still haven’t gone away.

“There's not going to be 50 people in line at the open house, probably more like 10. The folks who are serious, who've been sidelined for the last two years, who have lost out on maybe 12 different bidding opportunities, are still out there.” Miedler said. “Even at 5%, 5.5%, 6%, you're still well below the typical mortgage rate that we've seen in this country over the last 50 years.”

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Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda

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