"Starter homes" have long represented a segment of the housing market accessible to first-time buyers, giving them an entry point into homeownership which can later be leveraged into more comfortable digs. In the DC area, however, "starter" does not necessarily mean affordable.
A new Trulia analysis states that the median-priced starter home in the DC area costs 37 percent of the typical buyer's income. By Trulia's definition, a "starter" home is priced in the lowest third of the local market, yielding a median price of $249,900 in the DC area. By comparison, trade-up and premium homes in the region are quite affordable to their buyers, requiring 24 and 22 percent of income, respectively.
The affordability gap is on par with the rest of the country. Starter home buyers nationally tend to spend 37.7 percent of their incomes on the monthly mortgage. This is a notable jump in monthly payments compared to 2013 when the median home price was $169,900, requiring 27 percent of buyers' incomes. It is typically recommended that one spend no more than 30 percent of their income on housing costs.
The Trulia study assumes a 20 percent down payment and a 30-year fixed-rate mortgage in order to determine the affordability of the median home. Adjusted 2016 American Community Survey income data is divided into thirds to correspond with each of the three home classifications — the bottom third of earners purchasing starter homes, the middle third of earners purchasing trade-up homes, and the top third of owners purchasing premium homes.
This article originally published at https://dc.urbanturf.com/articles/blog/starter-home-buyers-spend-37-percent-of-income-on-mortgage-in-the-dc-area/15373.
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