Buying an affordable home in the United States has become increasingly difficult since 2020, with a new analysis from Bankrate.com showing that in 22 states and Washington, DC, buyers now need a six-figure household income to comfortably afford a typical median-priced home. This is a significant increase from January 2020 when the same analysis found that buyers needed a six-figure income in just six states and the District of Columbia. The rise in home prices has outpaced wage growth, leading to a decrease in affordability due to supply and demand factors, including less housing supply from decreased homebuilding and a reluctance from existing homeowners to sell due to higher mortgage rates and prices.
Defining affordability can vary based on individual financial circumstances, including income, savings, debt, and other properties owned. Factorings such as closing costs, property taxes, insurance, and home maintenance costs were not included in the Bankrate analysis, which focused solely on mortgage payments and assumed a 20% down payment and 30-year fixed-rate mortgage at the average interest rate. Nationally, the median home price is $402,343, requiring an annual income of $110,841 to afford a typical home. Housing affordability varies significantly by location, with the West Coast and Northeast requiring the highest incomes, while the South and Midwest require the lowest.
States where six-figure incomes are needed to afford a median-priced home include California, Hawaii, District of Columbia, Massachusetts, and Washington State, among others. Conversely, states in the South and Midwest such as Mississippi, Ohio, Arkansas, Indiana, and Kentucky require lower income levels. Income requirements have significantly increased compared to 2020 in states like Montana, Utah, Tennessee, South Carolina, and Arizona, while states in the Rust Belt and Midwest have seen more modest increases. The Sun Belt has become less affordable due to an influx of new homebuyers, while some deals can still be found in the Rust Belt and Midwest regions.
In conclusion, the analysis highlights the challenges of home affordability across different regions in the United States and the significant income requirements needed to purchase a median-priced home. The factors contributing to the lack of affordability include rising home prices, limited housing supply, and the impact of individual financial circumstances. While trends indicate a general decrease in affordability nationwide, there are regional variations that offer opportunities for buyers in specific locations. Overall, the analysis provides valuable insights into the complex nature of housing affordability and the challenges faced by potential homebuyers in today’s market.
