Oct 23, 2023 - News

Report: You need six figures to afford a house in Richmond

Illustration of a door knocker in the shape of a dollar sign

Illustration: Sarah Grillo/Axios

Richmonders need to earn just over $102,000 a year to afford to buy a typical home here, according to a new report from Redfin.

Why it matters: Americans haven't felt this discouraged about home buying in decades.

What's happening: High interest rates, low inventory and big home prices have put homeownership out of reach for many locals, especially first-time buyers, Redfin found.

  • Meanwhile, folks from Northern Virginia and other pricier markets have been relocating to Richmond for more affordable housing.

By the numbers: In the Richmond area, the median home sale price was $375,000 in August, Redfin found, while the median monthly mortgage payment topped $2,557.

  • That's a staggering 24.6% more than locals needed to earn a year ago.
  • And significantly more than the $81,388 median household income for metro Richmond.

Worth noting: In 2019, the median home sale price in metro Richmond was $270,000 — $100,000 less than today's.

Methodology: To determine affordability, Redfin took an area's median monthly mortgage payment, then calculated how much a buyer there would need to make to spend no more than 30% of their income on housing.

  • The formula assumes buyers are coming in with a 20% down payment, yet a separate report found it would take Richmonders on average nearly a decade to save for just a 10% deposit.

Yes, but: Richmond's needed income is lower than the national average of $115,000.

  • San Francisco leads the pack, with homebuyers needing to make more than $404,000 to afford the median monthly mortgage payment.
  • San Jose is next, requiring an annual income of about $402,000.
  • On the East Coast, New Yorkers need an annual income of around $198,000 and Washingtonians need to earn about $150,000.

State of play: Rising monthly payments have largely been driven by increases in interest rates.

  • The average rate on a 30-year fixed mortgage was about 7% in August, up from roughly 5.2% a year earlier, Redfin said.
  • Last week, rates hit 8%, the highest level since 2000, CBS reported.

Threat level: Inventory is expected to remain low and home prices to keep climbing for the remainder of the year, according to the latest housing report from Virginia Realtors.

What they're saying: "In a homebuyer's ideal world, rising mortgage rates would push demand and home prices down enough to make up for high-interest payments. But that's not what's happening now," Redfin economics research lead Chen Zhao said in a statement.

The bottom line: First-time buyers, who likely will have the most trouble getting a foothold in this market, should consider condos or townhouses, which tend to be less expensive than single-family homes, Zhao said.

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