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You need to make almost $76,000 a year to buy a starter home, according to<\/a> Redfin. The median household income is $74,580, per<\/a> the Census Bureau, or $84,072, by Redfin\u2019s estimate. Either way, something is wrong.\u00a0<\/p>\n It all goes back to the pandemic, when the remote-work revolution collided with historically low mortgage rates<\/a>\u2014it fueled a housing boom, and home prices soared almost 50% since<\/a>. And that\u2019s not all; mortgage rates followed, at one point reaching a more than two-decade high of just above 8%. They\u2019ve come down<\/a> since to 6.91%, but are still significantly higher than what they were during the pandemic and years prior. So what have we got? High home prices unaligned with normal incomes and high mortgage rates. Oh, and a shortage of homes<\/a>.\u00a0<\/p>\n \u201cStarter homes are roughly half<\/em> as affordable as they were before the pandemic,\u201d the author of the analysis wrote. \u201cAmericans needed to earn $40,465 annually to afford the typical U.S. starter home in February 2020, when the median sale price was $169,000 and the average mortgage rate was about 3.5%.\u201d<\/p>\n The typical starter home sold for $240,000 last month, and the average monthly mortgage payment was $1,896, according to a new analysis from Redfin. The former was up 3.4% and the latter 8.2% from a year earlier. And the income needed to afford said starter home is more than 8% higher than a year ago.<\/p>\n \u201cThe pandemic housing-market boom changed the definition of a starter home,\u201d a Redfin senior economist, Elijah de la Campa, said. \u201cA decade ago, many people thought of a starter home as a small three-bedroom single-family house. Now that type of home could cost seven figures, especially in expensive parts of the country.\u201d<\/p>\n Last year, Fortune<\/em> reported<\/a> the $300,000 starter home was going extinct. Ali Wolf, housing market research firm Zonda\u2019s chief economist, told Fortune<\/em> the share of new home projects under $300,000 were declining all across the country. \u201cWe\u2019re creating, inadvertently, a renter society not because of choice but because of force,\u201d Wolf said at the time\u2014and that it would fuel a \u201clarger imbalance between the haves and have-nots in the economy.\u201d We know right now renting is considered cheaper than buying and will be for years, by some estimates<\/a>.\u00a0<\/p>\n Wolf later told<\/a> Fortune<\/em>, Zonda adjusted what it considers to be entry-level to homes under $400,000. Homebuilders have even resorted to building smaller homes, as Fortune<\/em> has reported<\/a>, and it still isn\u2019t enough.\u00a0<\/p>\n \u201cToday\u2019s most affordable homes are still hard for the average American to afford, let alone the average first-time buyer who tends to put less money down in exchange for higher monthly payments,\u201d Redfin\u2019s de la Campa said. \u201cRising prices and mortgage rates are pushing buyers who earn more than the median income to buy starter homes, and often pushing buyers who earn less money out of the market.\u201d<\/p>\n However, starter homes are technically more affordable than they were last fall, but that\u2019s simply because mortgage rates aren\u2019t at 8% anymore, so monthly payments are slightly lower. Still, there are places across the country where it feels nearly impossible to even afford a starter home.\u00a0<\/p>\n The income needed to buy a starter home in California is the highest. \u201cA homebuyer needs to earn roughly $319,000 to buy the median-priced starter home in San Jose, $306,000 in San Francisco, and $247,000 in Anaheim,\u201d the analysis read; an 11.7%, 2.4%, and 12.1% annual increase, respectively.\u00a0<\/p>\n More so, to afford a normal starter home in Oakland, you need to make $209,096, or $216,189 in San Diego, or $177,886 in Los Angeles. For some context, California\u2019s median household income<\/a> is $91,905.\u00a0<\/p>\n Leaving California, you need to make $118,201 to afford a starter home in Austin; $158,764 in Boston; and $162,845 in New York, according to Redfin.\u00a0<\/p>\n And the needed income is the lowest in the Rust Belt\u2014in Detroit, you only need to make $22,000, or $32,000 in Pittsburgh, and $37,000 in St. Louis. But consider this, the income needed to afford a starter home only declined in one of the 50 most populous metropolitan areas: Pittsburgh. It rose everywhere else.<\/p>\n<\/div>\n\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n