Nick, & Cindy Davis

Starter-home cost hits a 10 year low

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Here’s why the U.S. real estate market is cooling: Pricing is simply too high. Starter homes have become more costly to buy than at any time since 2008, when the last boom came to a crashing halt. In the second quarter, first-time buyers needed almost 23% of their income to have the funds for a regular entry-level home, up from 21% a year earlier, as outlined by an analysis by the National Association of Realtors.

Starter-home cost hits a 10 year low

Starter-home cost hits a 10 year low

 

The real estate market, after years of price gains that outpaced income growth, is showing indicators of slowing as sales decline. The affordability crunch is particularly severe at the low end of the market and in hot locations where supplies are tightest and values have risen most. An increase in mortgage rates this year only made it worse.

“When prices go up at the entry level, that’s where the affordability issue is most acute,” Charles Dougherty, a Wells Fargo & Co. economist, said in a phone interview. “People are hesitant to stretch the amount they’re willing to pay.”

The highest priced U.S. markets include San Francisco and New York, where the median household needed about 65% of its income to purchase a home in the second quarter, as reported by an analysis from Trulia. The share was 59% in Los Angeles and 55% in Miami.

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(all data current as of 4/28/2025)

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