Do you remember the rich Australian who said in 2017 that young people would be able to buy homes if they spent less on avocado toast and coffee?
Tim Gurner's ill-advised comments reflected a widespread belief among Boomers and Generation X-ers that younger people who are today struggling to become homeowners have only their spending habits to blame. They remember the challenges they faced when they were first buying, and assume the young simply lack their focus, grit and perseverance.
Of course, that's untrue. And a new study reveals why.
On Average, You Need a $17,000 Raise To Buy Your First Home
"Five years ago, a median-income household could afford a typical U.S. home. Today, they're more than $17,000 short, even if they have $73,000 saved for a down payment," says a new study from Zillow, released June 30. The exact additional sum that would be needed to cover mortgage payments was $17,670 annually.
Of course, that's a nationwide average. And, no doubt, there are pockets of America where first-time buyers have it much easier. But there are plenty of others where it's much, much worse. "In four California markets, median earners would require a six-figure raise to afford the typical home," reckons Zillow.
And the barriers to homeownership are growing. In 2020, median earners in 39 major markets could afford to buy the average home in their area. Today, that's the case in only 11 of those markets, says the study.
Harvard Study: Home Prices as Multiples of Salary are Rising
A 2024 study from the Harvard Joint Center for Housing Studies found that the widening gap between home prices and salaries (the home price to income ratio) was largely a 21st-century issue. Up until 2000, around 90% of homes in metro areas cost less than 3.9 times average earnings. That dipped to about 50% in 2006, perhaps partly as a result of the easy availability of mortgages.
Affordability recovered near the end of the Great Recession, due to dropping home prices. But it then deteriorated again.
"In 2022, the median sale price for a single-family home in the US was 5.6 times higher than the median household income, higher than at any point on record dating back to the early 1970s," says Alexander Hermann, author of the Harvard study.
A Brighter Future?
