Starter Homes Are Affordable to the Typical Black Family in Just 10 Major U…

• Starter homes are affordable to a Black family earning the local median income in 10 major U.S. metros: Detroit, St. Louis, Baltimore, Indianapolis, Philadelphia, Cleveland, Pittsburgh, Warren, Columbus and Kansas City. For white families, starter homes are affordable in 32 major metros. 
• In San Francisco, a Black family earning the local median income would have to spend 104% of their earnings on a starter home. 
• Nationwide, a Black family earning the median U.S. income would spend more than 40% of their income on monthly housing costs to afford the typical starter home.

The typical Black household can afford a starter home in just 10 of the 50 most populous U.S. metros,  using the rule of thumb that a household should spend no more than 30% of their income on monthly housing costs. The typical white family can afford a starter home in 32 of those metros, over three times more.

Detroit is the most affordable major metro area for Black families looking to buy a starter home. In Detroit, a family earning the local median income for a Black household would spend 16% of their earnings to afford the median-priced starter home, taking current mortgage rates into account. 

This is based on an analysis that estimates median monthly housing payments for starter homes sold in May 2024, by race, for the 50 most populous U.S. metro areas. It is focused on “starter homes,” which we consider homes estimated to be in the 5th to 35th percentile of their respective metro area based on market value. We use the words “household” and “family” interchangeably in this report. Please see the end of this report for more on methodology. 

Detroit is followed by St. Louis, where a family earning the local median income for a Black household would spend 21% of their earnings to afford the typical starter home. Next come  Baltimore (23%), Indianapolis (26%), Philadelphia (27%), Cleveland (27%), Pittsburgh (29%), Warren, MI (30%), Columbus, OH (30%) and Kansas City, MO (30%). 

Starter homes are affordable to Black families in those metro areas because they’re among the least expensive places in the country to buy a home. In Detroit, for instance, the typical starter home costs just $66,000 and comes with a median monthly payment of $579. 

The typical Black family is unable to afford the median-priced starter home in the vast majority of major metros

Starter homes are unaffordable to the typical Black household in the 40 other U.S. metros included in this analysis.

In San Francisco, a Black family earning the local median income would have to spend more money than they make (104% of their earnings) on the typical starter home—the highest share in the country. All five of the least affordable markets for starter homes for Black families are in California; after San Francisco comes neighboring San Jose, where the typical Black family would spend 89% of their income on a starter home. Rounding out the top five are Los Angeles (81%), San Diego (78%) and Anaheim (71%). 

It’s essentially impossible for typical Black families to afford starter homes in much of California, even with healthy earnings, because it’s home to such expensive housing markets. In San Francisco, where the median household income for Black households is $81,205, starter homes are unaffordable because the median-priced starter home costs nearly $1 million and the monthly payment is over $7,000. (It’s also difficult for white families to afford starter homes in San Francisco, but to a lesser extent; a household earning the local median income for white families would spend 44% of their earnings on a starter home.)

Nationwide, the typical Black family would spend 41% of their earnings on housing to afford a starter home

Zooming out to the nation as a whole, the median-priced starter home is unaffordable to the typical Black American family. A household earning the median U.S. income for Black families ($57,129) would spend 41% of their earnings to afford the typical U.S. starter home, which costs $250,000 and comes with a monthly payment of $1,960 at the current average mortgage rate.

For comparison, starter homes are affordable to the typical white family nationwide. A household earning the median U.S. income for white families ($90,995) would spend 26% of their earnings to afford the typical starter home. The story is similar for Asian Americans;  a household earning the median U.S. income for Asian households would spend 20% of their earnings to afford the typical starter home. Starter homes are unaffordable for Hispanic families, though the affordability gap is relatively small: Hispanic households would spend 32% of their incomes on the median-priced starter home. 

“Starter homes have become increasingly difficult for everyone to afford, with prices of the typical starter home up 8% in the last year alone. That has pushed buyers who earn more money to buy starter homes and pushed lower-income buyers out of the market altogether–and many of those lower-income buyers are Black,” said Redfin Senior Economist Elijah de la Campa. “The encouraging news is that while there’s still a major homeownership gap between Black and white families, there are signs more Black Americans could start getting their foot in the door:  The share of U.S. mortgages taken out by Black homebuyers has ticked up recently, and the racial wage gap is shrinking.”

October 2023, when mortgage rates hit a 23-year high of 7.8%, was the least affordable month on record for Black families buying starter homes; at that time, they would have had to spend 44% of their income on the typical starter home. Affordability has improved–but only slightly–since then. 

Before the pandemic homebuying frenzy drove up housing costs, median-earning Black families could afford the typical U.S. starter home, though without much wiggle room. In 2019, Black families would have spent about 28% of their income on a starter home. The last time starter homes were affordable to a Black family earning the median income was January 2022, just before mortgage rates started increasing. White families could more comfortably afford starter homes before the pandemic; they would have spent around 17% of their income on one in 2019. 

Racial wealth gap makes it harder for Black families to afford starter homes

It’s considerably more difficult for the typical Black family than the typical white family to afford starter homes because the median income is lower for Black households. Additionally, Black families have less generational wealth, stemming from the nation’s history of systemic racism. The racial income gap is a big  driver of the racial housing affordability gap: The estimated median income for Black households nationwide is $57,129; for white families, it’s $90,995. 

In addition to the income gap, there’s a major racial wealth gap: The gap between Black and white families in liquid assets is even bigger than the income gap. That’s partly due to decades of redlining, racist housing covenants and other discriminatory policies. Black homebuyers also face other barriers to buying real estate; for instance, they’re more likely to have their mortgage applications rejected. Less than half (45.9%) of Black Americans own their homes, compared with 73.8% of white Americans. That means Black households are much more likely to be renters, and the increasing cost of starter homes also pushes prices of rentals up because of increased demand. 

That leaves Black families who rent with higher rental payments and  less opportunity to save for a down payment than before the pandemic housing boom drove up prices. It leaves Black families who are buying a home with lower down payments and bigger monthly mortgage payments. 

Methodology

This report is based on an analysis that estimates median monthly housing payments for starter homes sold in May 2024, by race. The analysis uses median home-sale prices, monthly mortgage rates (averaging 7.06% for May 2024) and median household incomes by race, and the assumption of a 5% down payment, principal, interest, taxes and insurance. 

Median household incomes come from the U.S. Census Bureau’s American Community Survey, which provides income data by race; because the most recent data is from 2022, we estimated current income levels based on national wage growth through May 2024. For the metro-level data, we use local median incomes by race as of 2022, grown at the national wage-growth rate. The estimated median income for white households is grown using wage growth data for “white” households, and the estimated median income for Black households is grown using wage growth data for “non-white” households. All discussion of metro-level affordability uses local median incomes, and discussion of national affordability uses the national median income. We use the words “household” and “family” interchangeably in this report. 

This report is focused on “starter homes,” which we consider homes estimated to be in the 5th to 35th percentile of their respective metro area based on market value.