A recent analysis by Bankrate has revealed that only 14 out of the 50 U.S. states have median-priced homes that are affordable for residents earning less than $75,000 annually. This number has significantly dropped from 36 states just four years ago, indicating a trend of rising home prices that favor wealthier Americans. The calculation of homeownership costs in each state assumes a 20% down payment, no homeowner association fees or mortgage insurance, and a 30-year fixed mortgage interest rate of 7.05%. The monthly mortgage payments are based on median sale price data from Redfin.
The 14 states where homes are most affordable, based on the annual income needed to cover homeownership costs without exceeding 28% of income on housing, include Mississippi, Ohio, Arkansas, Indiana, Kentucky, Iowa, Oklahoma, Michigan, Missouri, Louisiana, Alabama, Kansas, North Dakota, and West Virginia. These states offer median-priced homes that cost $300,000 or less, a significant discount compared to the national median price of $402,343. However, there are trade-offs such as higher poverty rates and fewer high-paying jobs in these states, many of which are among the most rural in the country. In rural areas, incomes tend to be lower than in urban cities.
On the other end of the spectrum, California stands out as the state where residents need the highest income to afford a median-priced home, at $197,057 for a home valued at $739,200. The overall median income needed to afford a home in the U.S. is $110,871, a notable increase from $76,191 in 2020. This rise is attributed to a long-standing shortage of homes exacerbated by supply chain constraints during the pandemic. Since 2020, median home prices have surged by 27%, while mortgage rates nearly doubled.
In states with high demand for homes like California and New York, home price gains have been more significant compared to rural or Rust Belt states like Mississippi and Michigan where prices have not increased as much. This makes these states relatively more affordable for middle-class earners. If you are interested in making extra money outside of your main job, CNBC offers an online course on How to Earn Passive Income Online, covering common passive income streams, starting tips, and real-life success stories. By registering now, you can save 50% with the discount code EARLYBIRD. Additionally, signing up for CNBC Make It’s newsletter provides tips and tricks for success in work, money, and life.
Overall, the analysis by Bankrate sheds light on the shifting landscape of homeownership affordability in the U.S., with a decreasing number of states where middle-income earners can comfortably afford median-priced homes. Rising home prices, supply chain constraints, and increased mortgage rates have contributed to the higher income requirements for homeownership. Despite the challenges, some states offer more affordable housing options, presenting opportunities for middle-class individuals to own homes without exceeding a significant portion of their income on housing costs.
