The average interest rate for a 30-year fixed mortgage hit 8% on Wednesday, according to Mortgage News Daily — marking a new high not seen since the year 2000.

The U.S. housing market’s affordability was already historically bad — it has been all year as home prices have remained stubbornly high. Home sales have slowed dramatically, but of those who are still able to buy, it begs a question: how?

How much do you have to make to buy a home?

A homebuyer must earn $114,627 to afford the median-priced U.S. home, which is up 15% or more than $15,000 from a year ago and up more than 50% since the start of the pandemic, according to recent estimates by Redfin, the highest annual income needed to afford a home on record. The analysis compares median monthly mortgage payments for homebuyers in August and August 2022, with income data adjusted for inflation.

The typical U.S. homebuyer’s monthly mortgage payment was at an all-time high of $2,886 in August, according to Redfin, up 20% from $2,395 a year earlier.

Meanwhile, the typical American household earns $40,000 below the income needed to buy the median-priced home.

Housing market prices are more unaffordable than ever in 99% of U.S. counties

“In a homebuyer’s ideal world, rising mortgage rates would push demand and home prices down enough to make up for high interest payments. But that’s not what’s happening now,” said Chen Zhao, Redfin’s economics research lead, in a prepared statement. “Although new listings are ticking up slightly, inventory is still near record lows as homeowners hang onto their low mortgage rates — and that’s propping up prices.”

It’s easier for cash buyers or move-up buyers to grapple with today’s affordability issues, but Zhao recommended struggling buyers, particularly first-timers who are dead set on getting into a home now, should “think outside the box.”

“Consider a condo or townhouse, which are less expensive than a single-family home, and/or consider moving to a more affordable part of the country, or a more affordable suburb,” Zhao said.

How are young homebuyers affording a house?

Another recent Redfin analysis found a significant chunk of homebuyers under the age of 30 used family money to make a down payment.

Just over 40% of homebuyers under the age of 30 used either a cash gift from a family member or an inheritance in order to afford their down payment, Daryl Fairweather, chief economist at Redfin, wrote last month, citing a Redfin commissioned survey of recent movers conducted this spring.

Fairweather deemed those young homeowners “nepo-homebuyers,” meaning they used family money to purchase a home.

“This phenomenon contributes to intergenerational wealth inequality and limits economic opportunities for young people and their families,” Fairweather wrote.

In response to the Redfin survey, which asked how recent homebuyers accumulated the money for their down payment, 509 respondents were under the age of 30. Among those, 23% used a cash gift from family members and 21% used inheritance money.

These days especially, it’s rare for young Americans to be able to afford a home, Fairweather noted. Seniors, those over 65, are about two times more likely to be homeowners than those under 35, according to U.S. Census estimates.

How the housing market is yanking the ‘American dream’ increasingly out of reach

“I admittedly fell into the category of a nepo-homebuyer,” Fairweather wrote. “I bought my first home at 27 in 2015 with help from my mother. She was experiencing health problems and couldn’t live alone, so she sold her condo and gave me the proceeds to buy a home we could live in together. Without my mother’s money, saving up for a down payment would have taken me years. But instead, I was able to purchase a home and secure my position as a homeowner. This allowed me to build equity, which I eventually used to buy a home for my mother to reside in when she was able to live independently again.”

As home prices remain high despite today’s high mortgage rate, an affordable starter home is becoming essentially extinct. As the income needed to afford a home has increased rapidly over the last several years and wages have not kept pace, many young people simply must “turn to family for help when getting onto the first rung of the housing ladder,” Fairweather wrote.

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“Young homebuyers without family money face a difficult road when building intergenerational wealth,” she wrote, and that dynamic is part of a bigger problem of wealth inequality in the U.S.

She noted many young people buying homes today have grandparents who bought homes before the passage of the Fair Housing Act, which made it illegal to discriminate against homebuyers on the basis of race, religion, national origin, disability status or family status. As a result, the impacts of that discrimination are still living on through generational wealth.

“These troubling trends are why we must make homeownership more affordable to first-generation homebuyers,” Fairweather said, pointing to down payment and rental assistance programs that can help while urging policy makers to continue reforming zoning laws to pave the way for construction of more affordable starter homes.

“To undo the inequities of the past, we must prioritize these policies,” she said. “Or else, homeownership may become a birthright instead of an attainable economic aspiration.”

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