Starter homes in San Diego: How much do you need to make to afford one?
Starter homes in San Diego: How much do you need to make to afford one?
SAN DIEGO (FOX 5/KUSI) — It’s getting harder for families earning the median U.S. income to afford a starter home and in San Diego, the story is no different.
The most recent data from Redfin showed that, as of July, the average income needed to afford a starter home in San Diego has gone up 6.8% from last year.
Aspiring first-time homeowners would need to make a minimum household income of nearly $200,000 to afford a starter home in San Diego, according to Redfin. Currently, the median household income has been estimated at just over $108,000.
As of July, the median cost of a starter home in the city was about $652,750, with a median mortgage payment listed at nearly $5,000 per month, data showed.
According to Redfin’s methodology, starter homes were determined by those whose sales price fell into the 5th-35th percentile of the estimate tiers. All U.S. properties were divided into five buckets based on estimates of homes’ market values as of July. The buckets were comprised of three equal tiers as well as the bottom and top 5% of the market.
The typical housing payments used for the analysis included the mortgage principal, interest, property taxes, homeowners’ insurance and, when applicable, mortgage insurance.
Last week, San Diego County launched an interactive tool to help people find affordable housing, including its location, income limits and eligibility information.
California has seen the largest affordability gap this year compared to other states. In both Anaheim and Los Angeles, a family would need to earn twice the local income to afford a starter home. You can find specific information for each city in the report here.
Nationwide, homebuyers need to earn about $80,000 to afford the median-priced starter home. This is up 4.4% from last year’s income requirement.
Homebuyers Must Earn Nearly $80,000 to Afford the Typical U.S. Starter Home, Just Shy of the All-Time High
- Homebuyers need to earn roughly $80,000 to afford the median-priced starter home, up 4.4% from last summer and only about $500 below the all-time high. That makes starter homes just barely affordable to families earning the median U.S. income, and unaffordable to families earning less than the median income.
- In half of the 50 most populous U.S. metros, a family earning the local median income can’t afford a starter home. The gap is biggest in Los Angeles and Anaheim, where a family needs to earn double the local median income to buy a starter home.
- There are a few bright spots: Starter home listings are up, and mortgage rates are coming down.
The monthly housing payment for the typical U.S. starter home that sold in July was $1,981, up 4.4% from a year earlier.
That means homebuyers must earn $79,252 annually to afford the typical starter home, also up 4.4% year over year and just a few hundred dollars shy of last October’s all-time high.
This is according to a Redfin analysis of estimated U.S. incomes, and median monthly housing payments for starter homes sold in July 2024. This report is focused on homes whose sale price fell into the 5th-35th percentile, which we define as starter homes. A home is considered “affordable” if a buyer spends no more than 30% of their income on housing, assuming a 3.5% down payment. There are more methodology details at the end of this report.
Americans need to earn more than a year ago–and much more than before the pandemic–to afford a starter home because mortgage rates are elevated and home prices are near record highs. The average mortgage rate was 6.85% in July, down slightly from its springtime peak but still more than double pandemic-era lows. The typical starter home sold for a record $250,000 in July, up 4.2% year over year.
Rising prices have pushed many middle-income Americans to buy starter homes, and pushed many lower-income households out of the market altogether. The typical U.S. household earns an estimated $83,966, just barely more than necessary to afford a starter home. But many people in the market for starter homes make less than the median U.S. income. A family earning 80% or less of the median income–$67,173 or less– cannot afford the typical starter home. Wages are increasing, but not as fast as the income needed to buy a starter home: Average hourly earnings were up 3.6% year over year in July.
Roughly 70% of U.S. starter homes are affordable to the median-earning household, down from about 73% a year ago and near the record low.
With housing affordability so strained, starter homes are a hot commodity; lower-income families, middle-income families and investors are all vying for them. Pending sales of starter homes rose 10% year over year in July to their highest level in nearly two years, while they dropped in all other price tiers. Rising demand for starter homes is one reason prices are at a record high.
“There are neighborhoods here that are both desirable and affordable, with homes selling in the $150,000 to $350,000 range. But first-time buyers are struggling because those homes typically get at least five offers,” said Ben Ambroch, a Redfin Premier agent in Milwaukee. “I recently listed a house for $210,000 and it received several bids, one of which included an offer to buy the seller pizza every Friday night until the deal closed. We ended up going with a higher offer, but that’s an example of the creativity we’re seeing as buyers compete for starter homes.”
The housing affordability crisis is a major issue in this year’s presidential election.
“Both Kamala Harris and Donald Trump have promised to make homeownership more affordable, but only Harris has signaled that housing is a top priority,” said Redfin Chief Economist Daryl Fairweather. “Her plan to build 3 million new homes could make starter homes more affordable for the average American family. One pathway Harris has suggested for accomplishing that goal is through incentives to local governments and subsidies for builders of affordable housing. That could help battle the severe starter-home shortage, particularly in expensive coastal markets. Harris has also promised $25,000 in down-payment assistance for first-time buyers, which could boost homeownership in midwestern markets where people may be able to afford mortgage payments, but not necessarily down payments.”
Southern California homebuyers must earn double the local median income to buy a starter home
In half of the 50 most populous U.S. metros, a family earning the local median income can’t afford to buy a starter home.
The affordability gap for starter homes is biggest in California. In both Anaheim and Los Angeles, a family would need to earn twice the local income to afford a starter home. Anaheim’s median income is $122,192; a family needs to earn $251,302 to afford the typical starter home. In Los Angeles, the median income is $93,197 and a household needs to earn $184,477 for a starter home. The gap is only slightly smaller in San Diego, San Francisco and San Jose.
It’s tough to afford even a starter home in much of California because even though residents tend to earn more money than some other parts of the country, it’s not enough to afford the state’s ultra-high home prices. Among the pool of starter homes on the market in many California metros, virtually none are affordable to someone earning the median income.
“Homes in the Bay Area are so expensive that even many high-earning tech employees have been priced out of the area, so they’re looking at neighboring cities,” said Craig Pellegrini, a Redfin Premier agent in the San Jose area. “I have one client who wanted to buy in Palo Alto, but they can’t afford it anymore so they’re looking in Sunnyvale and Santa Clara. That’s pricing out a lot of lower earners in those neighboring cities completely.”
Typical Detroit family earns more than twice what they need to afford a starter home
Starter homes are most affordable to median-earning families in the Rust Belt. In Detroit, where the median household income is $63,937, a family needs to earn $24,590 to buy the typical starter home. That makes Detroit more affordable than any other major U.S. metro for starter homes.
Next comes St. Louis, where the typical household earns $85,750 and a household needs $42,218 for a starter home. Pittsburgh, Cleveland and Philadelphia round out the top five.
The income needed to buy a starter home declined in Austin–and nowhere else
In Austin, a family needs to earn $117,781 to afford the median-priced starter home. That’s down 2.5% from a year ago, making it the only major metro that saw a decline; that’s because home prices have been falling all year in the Texas capital. But still, an Austin household earning the local median income of $103,945 can’t afford a starter home.
The income needed to afford a starter home has increased most in Chicago (+22.5%), Detroit (+19.5%), Cleveland (+15.6%), Cincinnati (+14.7%) and Pittsburgh (+14.6%), as home prices have increased. But the median-earning household can still afford a starter home in those metros.
There are a few bright spots for starter-home buyers:
- There are more starter homes to choose from. Listings of starter homes were up nearly 20% year over year nationwide in July, much bigger than the 4.1% increase for mid-priced homes. That gives prospective starter-home buyers in some parts of the U.S. more inventory to choose from.
- Mortgage rates are coming down. The average weekly mortgage rate was 6.46% as of August 22, down from 7.22% in May and a two-decade high of 7.79% last October.
- Growth in income needed to afford a starter home is slowing. The 4.4% year-over-year increase in income necessary to afford a starter home is one of the smallest since the start of 2021. For comparison, the increase was 14% in July 2023.
| Metro-level summary: Income needed to afford a starter home, July 2024
50 most populous U.S. metros |
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| U.S. metro area | Median sale price of starter home | Median monthly mortgage payment for starter home | Estimated median household income (2024) | Income needed to afford a starter home | Income needed to afford a starter home, YoY change |
| Anaheim, CA | $740,000 | $6,283 | $122,192 | $251,302 | 9.7% |
| Atlanta, GA | $267,500 | $2,166 | $94,048 | $86,647 | 3.5% |
| Austin, TX | $327,000 | $2,945 | $103,945 | $117,781 | -2.5% |
| Baltimore, MD | $220,000 | $1,855 | $108,865 | $74,214 | 6.8% |
| Boston, MA | $496,000 | $4,211 | $121,265 | $168,440 | 9.1% |
| Charlotte, NC | $259,500 | $2,035 | $86,294 | $81,380 | 7.5% |
| Chicago, IL | $210,000 | $1,978 | $95,513 | $79,119 | 22.5% |
| Cincinnati, OH | $185,000 | $1,523 | $85,910 | $60,900 | 14.7% |
| Cleveland, OH | $130,000 | $1,130 | $75,255 | $45,192 | 15.6% |
| Columbus, OH | $200,000 | $1,672 | $87,872 | $66,897 | 11.5% |
| Dallas, TX | $275,000 | $2,459 | $98,122 | $98,370 | 1.0% |
| Denver, CO | $419,000 | $3,306 | $109,919 | $132,234 | 3.5% |
| Detroit, MI | $70,000 | $615 | $63,937 | $24,590 | 19.5% |
| Fort Lauderdale, FL | $225,000 | $1,928 | $78,583 | $77,137 | 2.0% |
| Fort Worth, TX | $245,250 | $2,162 | $89,312 | $86,474 | 3.0% |
| Houston, TX | $220,000 | $1,955 | $88,758 | $78,180 | 3.2% |
| Indianapolis, IN | $175,000 | $1,433 | $86,071 | $57,310 | 9.7% |
| Jacksonville, FL | $240,000 | $1,943 | $83,672 | $77,704 | 3.8% |
| Kansas City, MO | $185,000 | $1,527 | $90,106 | $61,073 | 7.0% |
| Las Vegas, NV | $300,000 | $2,320 | $78,113 | $92,793 | 3.7% |
| Los Angeles, CA | $615,000 | $4,612 | $93,197 | $184,477 | 7.9% |
| Miami, FL | $320,000 | $2,641 | $71,749 | $105,657 | 7.6% |
| Milwaukee, WI | $195,000 | $1,711 | $83,882 | $68,445 | 8.9% |
| Minneapolis, MN | $268,200 | $2,234 | $106,426 | $89,361 | 4.4% |
| Montgomery County, PA | $326,000 | $2,598 | $123,457 | $103,903 | 9.8% |
| Nashville, TN | $310,000 | $2,425 | $91,136 | $97,018 | 3.1% |
| Nassau County, NY | $530,000 | $4,701 | $144,973 | $188,038 | 10.7% |
| New Brunswick, NJ | $350,000 | $3,080 | $118,993 | $123,187 | 9.1% |
| New York, NY | $455,000 | $4,142 | $96,338 | $165,668 | 5.8% |
| Newark, NJ | $380,000 | $3,402 | $109,263 | $136,075 | 14.4% |
| Oakland, CA | $629,000 | $4,850 | $135,725 | $194,004 | 4.4% |
| Orlando, FL | $267,000 | $2,173 | $80,102 | $86,903 | 4.9% |
| Philadelphia, PA | $140,000 | $1,151 | $72,840 | $46,059 | 11.5% |
| Phoenix, AZ | $325,000 | $2,502 | $89,407 | $100,070 | 0.9% |
| Pittsburgh, PA | $122,000 | $1,037 | $79,863 | $41,493 | 14.6% |
| Portland, OR | $415,740 | $3,395 | $101,424 | $135,797 | 1.9% |
| Providence, RI | $360,000 | $3,056 | $90,520 | $122,255 | 9.2% |
| Riverside, CA | $408,000 | $3,072 | $90,677 | $122,884 | 5.6% |
| Sacramento, CA | $430,000 | $3,651 | $100,152 | $146,027 | 3.2% |
| San Antonio, TX | $205,000 | $1,836 | $80,029 | $73,435 | 1.0% |
| San Diego, CA | $652,750 | $4,949 | $108,352 | $197,978 | 6.8% |
| San Francisco, CA | $950,000 | $7,136 | $159,665 | $285,426 | 5.5% |
| San Jose, CA | $970,000 | $7,485 | $170,034 | $299,414 | 5.5% |
| Seattle, WA | $560,000 | $4,552 | $126,310 | $182,060 | 4.0% |
| St. Louis, MO | $127,500 | $1,055 | $85,750 | $42,218 | 8.4% |
| Tampa, FL | $250,000 | $2,037 | $75,221 | $81,499 | 3.5% |
| Virginia Beach, VA | $244,900 | $1,992 | $88,791 | $79,679 | 7.1% |
| Warren, MI | $187,600 | $1,588 | $94,254 | $63,524 | 8.5% |
| Washington, DC | $365,000 | $2,984 | $137,234 | $119,361 | 5.0% |
| West Palm Beach, FL | $248,250 | $2,061 | $84,990 | $82,431 | 0.6% |
| Monthly median mortgage payments are calculated assuming the buyer made a 3.5% down payment, and they take that month’s median sale price and average mortgage rates into account. They include principal, interest, taxes and insurance. | |||||
Methodology
This is according to a Redfin analysis of estimated U.S. incomes, and median monthly housing payments for starter homes sold in July 2024. Here’s how we define “starter home” for the purposes of this report: Our analysis divides all U.S. properties into five buckets based on Redfin Estimates of homes’ market values as of July 2024. There are three equal-sized tiers, as well as tiers for the bottom 5% and top 5% of the market. This report is focused on homes whose sale price fell into the 5th-35th percentile of the Redfin Estimate tier.
We calculated how much annual income is needed to afford the median-priced starter home by using the rule of thumb that a home is considered “affordable” if a buyer taking out a mortgage spends no more than 30% of their income on their housing payment.
Monthly median housing payments are calculated assuming the buyer made a 3.5% down payment, and take that month’s median sale price and average mortgage-interest rate into account. The national income data in this analysis is adjusted for inflation using the Consumer Price Index. 2024 income is estimated based on projections from the U.S. Census Bureau’s (ACS) 2022 median household income using the 12-month moving average nominal wage growth rate compiled from the Current Population Survey and reported by the Federal Reserve Bank of Atlanta.
The typical housing payments noted in this report include the mortgage principal, interest, property taxes, homeowners’ insurance, and when applicable, mortgage insurance. In this report, the word “homebuyer” is used to refer to someone who is taking out a loan to finance their purchase.
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