From the Washington Post:
Many young workers today find that home prices are rising faster than their pay, making it harder for them to set aside the cash they need for the purchase, studies show.
The typical first-time home buyer today purchases a house that costs 2.6 times his or her annual income, according to a report released by Zillow this week. In the 1970s, new home buyers found homes that cost about 1.7 times their annual pay, the study found.
The shift means that people need bigger down payments to make the transition to home ownership. At the same time, they face obstacles that make it harder for them to save, such as student loan bills, higher rent costs and more expensive child care.
People have to strive for more expensive homes today than they did in the past because home prices have appreciated over time while wages have stayed mostly flat, says Svenja Gudell, chief economist for Zillow. “We’re seeing that first-time home buyers are renting for longer,” Gudell says. “Homes are more expensive so it takes them a while to get to that stage in their life.”
Consider, the typical home purchased by first-time home buyers cost a median $140,000 between 2010 and 2013, up from an inflation adjusted $87,300 in the 1970s, the study found. Meanwhile, the median income for first-time home buyers was $54,000 in 2013, about the same as it was in the 1970s, Zillow found.
As a result, aspiring home owners now spend more time than ever renting while they save up for the big purchase. Workers rent for six years on average before buying their first home — more than double the time spent renting in the 1970s, the report found. The median age for first-time home buyers is also up to 33, from 30 in the 1970s. Home buyers are also less likely to be married today.