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NYC is the second most unaffordable city for renters looking to buy a starter home

Renters here are more than $100,000 short of what they need to afford an entry-level home.

Shaye Weaver
Written by
Shaye Weaver

With rent prices at an all-time high here in NYC, buying a home or apartment is an attractive option. Unfortunately, buying a starter home, where you can build up equity and have something of your own, is actually not in the cards for most New Yorkers. In fact, a new study from Point2, an international real estate search portal, shows that NYC is the second most unaffordable city in the U.S. for renters looking to buy a starter home.  

New York City is among the only five large U.S. cities (including Los Angeles, Long Beach, Oakland and San Jose) where renters earned less than 40% of the income they would need to secure the median-priced starter home, the study shows. Renters here are more than $100,000 short of what they need to afford an entry-level home.

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In September, the median price of a starter home was $533,074 with a downpayment (20%) of $108,815. With a loan amount of $435,259, the yearly payment (at 6%) was $43,469. 

To afford this, one would need to make $144,895 per year. Right now, the average renter household income is just $52,724. That’s a 66% difference between renter household income and the income required for a starter home. Los Angeles is the only U.S. city worse off with a 70% difference.

“[Starter homes] used to be the small, super-affordable houses that a young person or family could buy in order to get on the property ladder,” Point2 says. “But now, they’ve come to represent simply the cheapest homes available in a market, or homes that fall within the 5th to 35th percentile price range. And it’s not just renters and young families who are vying for them: Downsizing baby boomers, second homebuyers and property investors are in direct competition with first-time buyers for this dwindling housing segment.”

To figure it all out, Point2 looked at renter household incomes in the 50 largest U.S. cities, based on population data from the U.S. Census Bureau and analyzed median starter home prices from Zillow. It also took into consideration property taxes and insurance costs as it looked at the median value of starter homes.

In the 1940s, about 70% of all new builds were starter homes that started at $6,990, it adds. By 1980, that share fell to 40%, and in 2019, a mere 7% of all new homes were small, affordable entry-level abodes.

In addition to scarce inventory, the site points to rapidly rising prices and interest rates as to why these homes are out of reach right now.

Only 15 of the 50 largest U.S. cities have prices that fit in with the old definition of “starter home,” where they are $200,000 or less. 

So where can you comfortably buy a starter home? Point2 says in Detroit, Michigan, Tulsa, Oklahoma, Memphis, Tennessee and Oklahoma City, Oklahoma. 

A renter in Tulsa would need to make close to $30,000 to cover the monthly mortgage payments for the median starter home, but renters here made $35,000 on average.

If you’re sticking around in NYC for the time being, this isn’t great news. But you’ll be glad to know that NYC rent prices are reportedly going down. Hold on to that!

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