You need to earn how much for a 'starter home' in Seattle?!

Rising costs of living and property price tags are hitting first-time homebuyers hard — and even harder in Seattle.

A person would have to earn a $173,378 annual salary to earn what Redfin considers a "starter home" in Seattle, according to the real estate company's February 2024 data.

That salary estimate is up roughly $31,000 from just six months ago, and up 8.4% from February 2023.

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“The pandemic housing-market boom changed the definition of a starter home,” Redfin Senior Economist Elijah de la Campa said in a statement. “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, and the most affordable homes are much smaller and may require a lot of work to make them habitable – which makes them cost even more."

A starter home is exactly what it sounds like: A property that a first-time homebuyer can afford to enter the real estate market and become a homeowner. To get wonky, Redfin considers a starter home to be within the fifth and 35th percentile of its listings, with mortgages that a person could afford using 30% of their income.

As of February, the median sale price of a Seattle starter home is $535,000, with a monthly mortgage of $4,334.

Seattle's numbers are a significant uptick from just six months ago when Redfin calculated that a person needed to earn $142,000 annually to afford the purchase.

“The price of a Seattle-area starter home is more than double that of the typical U.S. starter home," de la Campa told KUOW. "And while Americans earning the median U.S. income can still afford the typical starter home, this isn’t the case in Seattle. Local residents earning the median income make about $47,000 less than what is required to afford the metro’s entry-level homes. Given that aspiring first-time homebuyers are more likely to have lower wages, it puts homeownership even further out of reach for them.”

This all adds up to a changing dynamic among those who can afford to buy a home, according to de la Campa, who added that the "most affordable homes are still hard for the average American to afford." With prices on the rise, along with mortgage rates, the median-income buyers are more likely to grab up starter homes, and lower-income buyers are being pushed out of the market.

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Seattle's northwest neighbor, Portland, is also experiencing an uptick, but not nearly as bad. A first-time homebuyer currently needs to earn about $130,715 for a starter home in that city (up 6% from February 2023).

National starter homes

Seattle is outpacing national numbers. A person needs to earn $75,849 to afford a starter home in the United States (up 8.2% from last year), which has a median price of $240,000.

This news comes shortly after Redfin also reported the typical U.S. household earns about $30,000 less than is needed to afford a median-priced home. Also, housing costs across the country are growing about twice as fast as incomes are. That could be contributing to the numbers. Starter homes are now half as affordable as they were before the pandemic struck in 2020. At that time, a U.S. homebuyer needed a $40,465 annual salary to afford this type of property.

But how the numbers shake out exactly varies widely from state to state.

Consider California: A homebuyer needs to earn about $319,000 in order to afford a median-priced starter home in San Jose; $306,000 in San Francisco; and $247,000 in Anaheim.

Starter homes are cheapest in Rust Belt cities, such as Detroit, where a person earning $22,000 can afford a home, or Pittsburgh, where the salary is $32,000.

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Redfin says there are more of these starter homes on the market, nationally, which could be good news; however there is another issue. First-time homebuyers aren't just competing against each other, or others generally looking to buy. There's a third player: real estate investors. This is potentially why so many of these properties are going to all-cash offers — 36.5% of starter homes in February went cash-only customers. Redfin believes many of these properties are being put on the rental market.

That echoes reporting from NPR, which states that the percentage of property sales to investors rose from 15% in January 2023 to 22% in January 2024.