Renters in LA & NYC Least Likely to Be Able to Afford Starter Homes
- Renters in 15 of the 50 largest cities in the U.S. earn less than half of what they’d need to become homeowners.
- Los Angeles; New York City; and Long Beach, CA renters are facing the largest gaps in terms of what they’re earning and what they would need in order to afford a mortgage on a starter home.
- Renters can afford a starter home in only four of the largest U.S. cities: Detroit; Tulsa, OK; Memphis, TN; and Oklahoma City.
For renters in 50 of the largest cities in the U.S., the dream of affordable homeownership is far away: That’s because the gap between incomes and the amount needed to cover mortgage payments is just too wide, according to a recent study by Point2, a real estate listings website. Moreover, in 15 cities, it has even become an outright impossibility with renters earning only half (or even less) of the amount needed to cover their mortgage payments. In fact, according to Point2’s research, renters in only four out of 50 large cities would be able to afford an entry-level home.
Once considered the most affordable houses on the market, starter homes have seen a steady decline since the 1940s when they represented nearly 70% of all new houses. By 2021, they made up just 7% of new homes. At the same time, their slow disappearance has had an effect on their affordability, as well, according to Point2.
Initially, starter homes were seen as a viable way for first-time buyers to begin building equity. But now, they’re simply homes that are valued in the bottom one-third of all available homes for sale. Consequently, competition is high as these homes are not only sought after by young people, but also by downsizing Baby Boomers and second-time homeowners.
However, the low number of starter homes is just one part of the issue: High prices and interest rates have an even bigger influence. For this reason, Point2 looked at the median price of starter homes and mortgage rates and then compared that to the median renter household income to see how much renters would need to be able to afford a starter home today. In other words, how close are renters to achieving their dream of homeownership in the 50 largest cities?
West Coast Claims Most Cities Where Renters Are Unable to Afford Entry-Level Homes
Los Angeles renters face the largest gap between the income necessary to afford a mortgage and the median renter household income. Specifically, in LA. the minimum annual income required to afford a starter home (considering a 7% interest rate) would be about $166,937. For comparison, the average renter household makes around $49,568 per year. This means that the average LA renter comes up $117,369 (or 70%) short of making their dream of homeownership a reality.
Likewise, renters in New York City face a similar gap: Here the income required to afford a house is $156,343, whereas the average New York renter makes about $52,724. This means that prospective first-time buyers are 66% short of making the transition to homeownership. In other words, they make $103,618 less than necessary.
On the opposite coast, Long Beach, CA renters would need a minimum annual income of $138,658 in order to afford a starter home. But with an average income of $50,566, they’re $88,092 short. That means that there’s a 64% gap between what renters make and what they actually need to bring in in order to become homeowners.
Next up, Oakland, CA, came in fourth place with a 63% gap, tied with San Jose, CA. Similarly, Miami, San Diego and San Francisco all have a 60% gap, followed by Boston at 58%. Not far behind, renters in Austin and Seattle also face a 57% gap between their yearly income and the minimum annual income required to afford a starter home. At the same time, Portland, OR, faces a 55% gap, while Fresno, CA; Sacramento, CA; and Tucson, AZ are all 52% short.
That said, San Francisco is notable for ranking 8th on the list with a gap of 60%, as compared to fellow California cities, such as Los Angeles (70%) and Long Beach (64%). This difference is likely due to the fact that renters in San Francisco earn an average yearly income of $100,715 — higher than that of LA, New York City or Long Beach — which is only $150,475 short of the required $251,190 that first-time buyers need in order to become homeowners. As a result, San Francisco is slightly more affordable compared to some other cities on the West Coast.
Midwest is Last Remaining Affordable Place For First-Time Buyers
The American heartland has a reputation for affordability in terms of real estate. So, it comes as no surprise that the only four cities that are within reach for first-time homebuyers are in the Midwest: Detroit; Tulsa, OK; Memphis, TN; and Oklahoma City.
Notably, renters in Detroit are in the best position to make the transition to homeownership: The annual income required to afford a house in the Motor City is $19,103. Compared to the average yearly income of $25,004, that means renters in Detroit make 31% more than they would need in order to become homeowners.
Second on the list is Tulsa, OK where the gap between the average renter household income ($35,039) and the required annual income to afford a house ($29,521) is 19%. This means that renters in Tulsa make $5,515 more than necessary to become homeowners.
Renters in Memphis, TN, are in a similar situation: They make 11% more than a first-time buyer would need to buy a house. Put another way, Memphis renters have $3,007 more than the required annual income of $27,966.
Rounding out the list, Oklahoma City renters are right on the edge of joining Kansas City, MO, in the unaffordability territory: With a gap of only 0.4% between the yearly renter income ($37,211) and the required income ($37,071) that they would need in order to afford a starter home, they face a difference of only $140.
In the chart below, we’ve gathered all of the data used in this report — from starter home prices, down payment, loan amount, yearly payment and required yearly income to the median income of a renter household in 50 of the largest cities in the U.S.
| City | State | Median Starter Home Price September | Starter Home Down Payment (20%) | Loan Amount | Yearly Payment (6% rate) | Yearly Income Required (6%) | Yearly Payment (7% rate) | Yearly Income Required (7%) | Median Income (Renter Household) | Renter Household Income as % of Income Required (with 6% rate) | Renter Household Income as % of Income Required (with 7% rate) |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Detroit | MI | $48,129 | $9,626 | $38,503 | $5,427 | $18,091 | $5,731 | $19,103 | $25,004 | 138% | 131% |
| Tulsa | OK | $95,481 | $19,096 | $76,385 | $8,255 | $27,515 | $8,857 | $29,524 | $35,039 | 127% | 119% |
| Memphis | TN | $87,174 | $17,435 | $69,739 | $7,839 | $26,131 | $8,390 | $27,966 | $30,973 | 119% | 111% |
| Oklahoma City | OK | $126,442 | $25,288 | $101,154 | $10,323 | $34,411 | $11,121 | $37,071 | $37,211 | 108% | 100% |
| Kansas City | MO | $139,010 | $27,802 | $111,208 | $11,460 | $38,201 | $12,338 | $41,126 | $38,383 | 100% | 93% |
| Baltimore | MD | $127,410 | $25,482 | $101,928 | $11,154 | $37,179 | $11,958 | $39,860 | $36,380 | 98% | 91% |
| Philadelphia | PA | $149,657 | $29,931 | $119,726 | $11,745 | $39,152 | $12,690 | $42,300 | $36,648 | 94% | 87% |
| Louisville | KY | $149,240 | $29,848 | $119,392 | $11,643 | $38,809 | $12,585 | $41,949 | $35,431 | 91% | 84% |
| Indianapolis | IN | $146,240 | $29,248 | $116,992 | $11,574 | $38,580 | $12,497 | $41,657 | $34,918 | 91% | 84% |
| Milwaukee | WI | $111,928 | $22,386 | $89,542 | $10,786 | $35,954 | $11,493 | $38,309 | $31,698 | 88% | 83% |
| Columbus | OH | $167,046 | $33,409 | $133,637 | $14,469 | $48,228 | $15,523 | $51,743 | $41,628 | 86% | 80% |
| Virginia Beach | VA | $267,442 | $53,488 | $213,954 | $19,453 | $64,845 | $21,141 | $70,472 | $56,562 | 87% | 80% |
| Jacksonville | FL | $204,221 | $40,844 | $163,377 | $15,272 | $50,908 | $16,561 | $55,205 | $41,010 | 81% | 74% |
| Omaha | NE | $183,514 | $36,703 | $146,811 | $15,803 | $52,676 | $16,961 | $56,537 | $40,315 | 77% | 71% |
| Houston | TX | $196,661 | $39,332 | $157,329 | $16,814 | $56,048 | $18,056 | $60,186 | $41,364 | 74% | 69% |
| Chicago | IL | $204,696 | $40,939 | $163,757 | $17,740 | $59,133 | $19,032 | $63,440 | $43,591 | 74% | 69% |
| Dallas | TX | $221,140 | $44,228 | $176,912 | $18,477 | $61,590 | $19,873 | $66,243 | $45,047 | 73% | 68% |
| Colorado City | CO | $261,335 | $52,267 | $209,068 | $18,342 | $61,140 | $19,991 | $66,638 | $45,084 | 74% | 68% |
| Minneapolis | MN | $234,576 | $46,915 | $187,661 | $18,114 | $60,379 | $19,594 | $65,314 | $43,310 | 72% | 66% |
| El Paso | TX | $156,454 | $31,291 | $125,163 | $14,252 | $47,507 | $15,240 | $50,799 | $32,231 | 68% | 63% |
| Fort Worth | TX | $232,034 | $46,407 | $185,627 | $19,537 | $65,122 | $21,001 | $70,004 | $44,238 | 68% | 63% |
| Charlotte | NC | $300,505 | $60,101 | $240,404 | $21,831 | $72,770 | $23,728 | $79,093 | $49,023 | 67% | 62% |
| Washington, D.C. | D.C. | $412,051 | $82,410 | $329,641 | $27,745 | $92,483 | $30,346 | $101,153 | $61,871 | 67% | 61% |
| Atlanta | GA | $271,427 | $54,285 | $217,142 | $19,935 | $66,451 | $21,649 | $72,162 | $42,359 | 64% | 59% |
| San Antonio | TX | $217,069 | $43,414 | $173,655 | $18,493 | $61,645 | $19,864 | $66,212 | $38,554 | 63% | 58% |
| Phoenix | AZ | $304,227 | $60,845 | $243,382 | $20,985 | $69,951 | $22,906 | $76,352 | $43,866 | 63% | 57% |
| Raleigh | NC | $323,877 | $64,775 | $259,102 | $23,042 | $76,806 | $25,086 | $83,621 | $47,469 | 62% | 57% |
| New Orleans | LA | $178,642 | $35,728 | $142,914 | $13,302 | $44,340 | $14,430 | $48,098 | $27,017 | 61% | 56% |
| Tampa | FL | $279,676 | $55,935 | $223,741 | $20,322 | $67,741 | $22,088 | $73,626 | $40,006 | 59% | 54% |
| Arlington | TX | $269,683 | $53,937 | $215,746 | $22,434 | $74,780 | $24,136 | $80,454 | $42,826 | 57% | 53% |
| Mesa | AZ | $328,514 | $65,703 | $262,811 | $22,526 | $75,088 | $24,600 | $82,000 | $43,177 | 58% | 53% |
| Nashville | TN | $344,349 | $68,870 | $275,479 | $23,876 | $79,586 | $26,049 | $86,831 | $45,469 | 57% | 52% |
| Las Vegas | NV | $314,090 | $62,818 | $251,272 | $21,611 | $72,037 | $23,594 | $78,646 | $40,842 | 57% | 52% |
| Denver | CO | $433,502 | $86,700 | $346,802 | $29,059 | $96,862 | $31,795 | $105,983 | $53,420 | 55% | 50% |
| Albuquerque | NM | $244,924 | $48,985 | $195,939 | $18,373 | $61,244 | $19,919 | $66,398 | $33,453 | 55% | 50% |
| Tucson | AZ | $246,408 | $49,282 | $197,126 | $18,203 | $60,678 | $19,759 | $65,862 | $31,885 | 53% | 48% |
| Sacramento | CA | $392,158 | $78,432 | $313,726 | $27,389 | $91,295 | $29,864 | $99,547 | $47,524 | 52% | 48% |
| Fresno | CA | $276,887 | $55,377 | $221,510 | $19,887 | $66,291 | $21,635 | $72,117 | $34,357 | 52% | 48% |
| Portland | OR | $431,274 | $86,255 | $345,019 | $30,729 | $102,431 | $33,452 | $111,505 | $49,643 | 48% | 45% |
| Seattle | WA | $645,382 | $129,076 | $516,306 | $44,635 | $148,782 | $48,708 | $162,361 | $70,164 | 47% | 43% |
| Austin | TX | $454,836 | $90,967 | $363,869 | $35,910 | $119,698 | $38,781 | $129,268 | $55,640 | 46% | 43% |
| Boston | MA | $517,312 | $103,462 | $413,850 | $35,024 | $116,748 | $38,290 | $127,632 | $53,188 | 46% | 42% |
| San Francisco | CA | $1,048,498 | $209,700 | $838,798 | $68,739 | $229,129 | $75,357 | $251,190 | $100,715 | 44% | 40% |
| San Diego | CA | $649,996 | $129,999 | $519,997 | $43,837 | $146,122 | $47,940 | $159,799 | $63,390 | 43% | 40% |
| Miami | FL | $356,643 | $71,329 | $285,314 | $25,417 | $84,723 | $27,668 | $92,227 | $36,532 | 43% | 40% |
| San Jose | CA | $933,402 | $186,680 | $746,722 | $62,124 | $207,081 | $68,016 | $226,720 | $84,730 | 41% | 37% |
| Oakland | CA | $622,951 | $124,590 | $498,361 | $42,332 | $141,106 | $46,264 | $154,213 | $57,431 | 41% | 37% |
| Long Beach | CA | $562,462 | $112,492 | $449,970 | $38,047 | $126,823 | $41,597 | $138,658 | $50,566 | 40% | 36% |
| New York | NY | $544,074 | $108,815 | $435,259 | $43,469 | $144,895 | $46,903 | $156,343 | $52,724 | 36% | 34% |
| Los Angeles | CA | $682,002 | $136,400 | $545,602 | $45,776 | $152,587 | $50,081 | $166,937 | $49,568 | 32% | 30% |
For the full report and methodology, please head over to Point2.
