A recent analysis by Bankrate found that American home buyers need to have an annual income of over $150,000 to afford a median-priced home in six states and Washington, DC. California requires the highest salary, with buyers needing to earn $197,057 per year to buy a typical home. The other states include Hawaii, Washington, DC, Massachusetts, Washington state, Colorado, and New Jersey. This is a significant increase from four years ago when only a few states required a six-figure salary to afford a home.
Five states, including Montana, Utah, Tennessee, South Carolina, and Arizona, saw the biggest increase in the income needed to afford a median-priced home, with the increase being over 65 percent in all five states. This increase is attributed to high home price appreciation in these states in recent years. In contrast, states like North Dakota, Illinois, and Louisiana, which saw population declines, experienced little change in the salary needed to afford a typical home. The rise in income needed to afford a home also coincides with a sharp increase in mortgage rates and house prices, with interest rates nearly doubling from during the pandemic.
Overall, home buyers across the United States need an annual income of $110,871 to afford a median-priced home, which Bankrate calculates as costing $402,343 with a monthly mortgage payment of $2,587. The median household income in the United States is significantly lower, at $74,755, highlighting the challenge of home affordability for many Americans. Housing is more affordable in the Midwest and the South, where salaries of at least $63,000 are necessary to afford typical homes in states like Mississippi, Ohio, Arkansas, Indiana, and Kentucky.
Bankrate housing market analyst Jeff Ostrowski emphasizes the importance of affordability, noting that the higher the price of a home, the harder it is to come up with the down payment or qualify for the monthly payment. Despite the challenges, Ostrowski encourages those ready to buy to move forward, as there is no guarantee that the market will become more favorable for buyers in the future. The analysis sheds light on the growing disparity between home prices and median incomes across different states, highlighting the ongoing affordability crisis in the American housing market.
