[Fox Business] First-time buyers need this much to afford a starter home

First-time homebuyers have to earn nearly twice as much money to purchase a starter home compared with pre-COVID-19 pandemic times.  

As of February, first time buyers needed to earn $75,849 annually to afford the typical U.S. starter home, which is nearly $6,000 more than they did a year ago, due to elevated mortgage rates and high home prices, according to recent data from Redfin. 

According to data from the technology-powered real estate brokerage, the monthly housing payment for a starter home jumped 8.2% in February from a year earlier, reaching $1,896.  

It’s a stark difference compared with February 2020 – before the pandemic – when Americans needed to earn $40,465 annually to afford a starter home. At the time, the median sale price was $169,000 and the average mortgage rate was about 3.5%, according to Redfin data. 

Today, mortgage rates are hovering just under 7%. 

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While incomes are on the rise, they are not keeping pace with the rate of starter-home costs. 

As of February, a typical American household earned an estimated $84,072, up 5.5% from a year earlier. In comparison, the income needed to purchase a starter home jumped 8.2% from a year earlier. 

Today, the median income is 11% higher than what’s needed to buy a starter home. However, a year ago, it was 14% higher, and during pre-pandemic times, it was 63% higher, according to Redfin. 

In a separate report, the brokerage noted that a buyer in the overall market must earn about $114,000 to afford the typical U.S. home. That is roughly $30,000 more than the median U.S. household income.

Redfin senior economist Elijah de la Campa said that the pandemic, which caused a “housing-market boom,” ended up changing the definition of a starter home.

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“A 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,” de la Campa said.

Not only are the most affordable homes much smaller, but they “often require a lot of work to make them habitable – which makes them cost even more,” he added.

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With rising prices and borrowing costs, “today’s 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,” de la Campa said. 

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[Fox Business] High homeowners insurance rates scaring away Florida homebuyers, other states face the same issue

Florida is in the middle of an unprecedented insurance crisis. The state has the highest homeowners’ insurance rates in the country, an Insurify study found.

These record-high rates are driving potential homeowners away, especially in coastal areas where rates are highest. 

Realtors in the state cite the aftermath of Hurricane Ian as one of the largest factors driving rates up, a Bloomberg article reported. After Hurricane Ian, rates shot up by 42%, according to the Insurance Information Institute.

“You’ve got people that went through the storm and just want to move on, and don’t really think the affordability is here anymore because of insurance,” said Marlissa Gervasoni, Royal Palm Coast Realtor Association president.

Southwest Florida has traditionally been a hot spot for buyers. Its home prices have often outpaced the national average. Even with an increase in listings, buyers are now shying away from the area, largely due to unaffordable homeowners insurance.

Additionally, rampant insurance fraud has plagued Florida in recent years, causing insurers to raise rates to keep up with demand.

You can shop around to make sure you’re not overpaying for your homeowners insurance policy. Get free quotes from Credible in minutes and compare multiple policies at once.

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Florida isn’t alone when it comes to rising homeowners’ insurance rates. Nationally, the average cost of homeowners’ insurance went up by 12% for $300,000 in property coverage, Insurify’s report found. The average annual cost now sits at $1,770.

Certain states have felt these rising premiums more than others. While Florida tops the list, Oklahoma residents have seen their annual rates increase 24% to $4,782, on average. Mississippi follows close behind with an average yearly premium of $4,017, up 23% from the previous year. Texas has also seen an increase in claims due to dangerous weather with an average premium of $3,969, up 18% annually.

These states face a higher risk of weather-related events that require large payouts from insurers. In turn, insurance companies are becoming less profitable and raise rates.

Areas that have a low risk of natural disasters pay the lowest rates. Currently, Vermont has the cheapest homeowners insurance rates, at just $914 annually, on average, according to Insurify.

Having enough insurance is vital. Having the appropriate insurance coverage is just as important. To ensure your insurance is suitable for your circumstances, visit Credible to check out plans, providers and costs.

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Specific insurance companies are raising rates across multiple states. Allstate has implemented rate hikes in Illinois recently, as well as California, New York and New Jersey.

In Illinois, Allstate rolled out a 12.7% increase in rates, the Chicago Tribune Reported. At the end of 2023, the company raised rates in California by 30% on average, while New Jersey saw rates go up by 20% and New York residents’ rates went up by 14.6%, Insurance Business Magazine reported.

State Farm also plans to raise homeowners insurance rates, particularly in Illinois. For new policies opened in March, homebuyers will see rates rise by 12.3%, according to the Chicago Tribune. For renewals, customers won’t see rates rise until May. In terms of dollars and cents, policies will go up by about $138, on average.

If you’re considering switching insurance providers, consider using Credible, where you can get free rates quotes from a variety of companies without affecting your credit score.

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