Home Buying

How much do you need to make to afford a starter home here?

With higher mortgage rates recently, the income it takes to purchase a starter home in the U.S. has risen by 86%, Realtor.com reports.

Home price appreciation has slowed across the country — even in Greater Boston — but mortgage rates have climbed to highs not seen in 14 years.

The average cost of a starter home is up 48% nationwide, and the estimated gross income required to purchase one has jumped 86%, according to a report Realtor.com released Wednesday.

And the hits just keep on coming for buyers: Home price appreciation has slowed across the country — even in Greater Boston — but mortgage rates have climbed to highs not seen in 14 years.

So what income do you need to buy a two-bedroom starter home in metro Boston? According to the report, you need to make $183,855 to buy a starter home here. That’s a deal-breaker for a lot of prospective buyers because the median household income in metro Boston in 2020 was $76,298, according to the U.S. Census Bureau.

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Melvin A. Vieira Jr., president of the Greater Boston Association of Realtors, attributes the rising prices to “the lack of housing being built.”

“Plus, we haven’t thought about how to move the different segments of the market, such as the parents of the baby boomers, the baby boomers, and the largest population on earth, which is the millennials,” Vieira told Boston.com in an email. ” For example, we haven’t thought about how to build more three-families [and] two-families so that multigenerational [families] can move in together or even buy homes together as we did in the past.”

The scarcity of land to build is another factor, he wrote, but there are two crucial things that need to be addressed in order to bring more affordable housing to the table: zoning reform and getting more young men and women into the building trades. “We really need to do a big push on zoning reform,” he wrote. “The process to build any kind of project or home takes too long. We need to learn how to speed the process up so that the carrying costs will go down for the developer.”

To address the need for more affordable housing, Mayor Michelle Wu of Boston is looking to double the speed of the approval process. “Building a Boston for everyone means ensuring that all of our residents and families have access to safe, affordable housing across our communities,” Wu said in a statement Thursday.

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Specifically, Wu will direct the Boston Planning and Development Agency to study and recommend changes to Article 80 of the Boston Zoning Code to “establish an alternative path for the review of affordable housing developments,” officials said in a news release.

Affordable housing woes aren’t isolated to Boston and its neighboring communities, however. Take a look at how some other New England metros stacked up in comparison:

Metroest. monthly paymentest. required income
Boston$4,596$183,855
Worcester$2,685$107,412
Springfield$1,903$76,137
Providence$2,615$104,615
Portland, Maine$3,383$135,311
Hartford, Conn.$1,813$72,510
Source: Realtor.com

The required income for Portland, Maine, may come as a surprise, but for those following the exodus of Greater Boston home shoppers to northern New England and to Providence, perhaps it is not.

“That’s a good insight,” said Danielle Hale, chief economist at Realtor.com, told Boston.com via email. “In fact, our cross-market demand data from Q2 show that Boston was the number one source of home shoppers in the Portland-South Portland metro area, and at 29% of shoppers, there were nearly as many coming from Boston as from within the Portland metro area itself (30.2%).”

But what does that mean for local prospective buyers?

“Other major East Coast metros also sent buyers to Portland, including New York, Washington, D.C., and Philadelphia,” she wrote. “In total, more than three of every five shoppers in Portland was from out of state, which is likely making it harder for local home shoppers to compete, even as all of the interest from elsewhere boosts values for local homeowners.”

And the increase in home prices is glaring throughout New England. Look at how costs have skyrocketed in these metro areas compared with pre-pandemic levels:

CitySept. 2019
median starter home price
Sept. 2022
median starter home price
% price increase
Boston$469,950$659,00040.2%
Portland, Maine$295,000$485,00064.4%
Springfield$191,400$272,90042.6%
Providence$272,500$374,97737.6%
Hartford$179,900$259,90044.5%
Source: Realtor.com

And the jump in the median monthly payment for those homes:

city2019 starter home
monthly payment
2022 starter home
monthly payment
% increase
in monthly
payment
Boston$2,597$4,59677%
Portland, Maine$1,630$3,383107.5%
Springfield$1,058$1,90380%
Worcester$1,381$2,68594.4%
Providence$1,506$2,61573.7%
Hartford$994$1,81382.4%
Source: Realtor.com

And the increase in required income to buy a starter home:

city2019 starter
home required gross income
2022 starter
home required gross income
% increase
in income needed
Boston$103,862$183,85577%
Portland, Maine$65,197$135,311107.5%
Springfield$42,300$76,13780%
Worcester$55,251$107,41294.4%
Providence$60,224$104,61573.7%
Hartford$39,759$72,51082.4%
Source: Realtor.com

San Jose, California, home to Silicon Valley, topped the list of the most expensive metros, with a required income of $245,234, followed by San Francisco ($239,933), and Honolulu ($191,109).

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