New data reveals that prospective homeowners in 22 states need a six-figure salary to buy a typical home.
To buy a home with an average price of $402,343, Americans need an annual income of $110,871, according to a new analysis from Bankrate. This is an increase of almost 50% in the past four years alone.
As of January 2020, only six states and the District of Columbia required a six-figure salary to buy a typical home.
But due to a combination of high mortgage rates, rising home prices, and a historic shortage of real estate on the market, that number now exceeds nearly half of all states and the District of Columbia.
Aspiring homeowners in the West and Northeast need the most annual income to buy the average home, Bankrate said.
Californians need an annual income of $197,057, more than three times the $63,043 needed to buy a typical home in Mississippi, the least expensive state.
“Home price growth has outpaced wage growth so far, making housing unaffordable,” said Jeff Ostrowski, a Bank Rates analyst.
“Why did house prices rise so quickly?” Blame it on supply and demand. “Over the past few years, the supply of housing has been constrained by a number of factors, including weak housing construction and lock-in effects,” he continued.
“However, demand for housing is increasing and there are more buyers than sellers.”
To calculate the income needed to purchase a typical home, Bankrate analyzed home sales, mortgage interest rates, property taxes, and homeowner insurance rates across states.
Hawaii is the state with the second-highest income required to buy a typical home, after California, at $185,829, according to Bankrate.
According to the study, a person living in the District of Columbia needs a salary of $167,871 to buy a typical home, a person living in Massachusetts needs a salary of $162,471, and a resident of Washington State needs a salary of $156,814. They say they need a higher salary.
Californians need an annual income of $197,057 to buy a typical home, the highest of any state.
According to Bankrate, Hawaii is the state with the second-highest income required to purchase a typical home, at $185,829.
Additionally, in many Western states that have experienced economic boom during the COVID-19 pandemic, such as Utah, Montana, and Idaho, would-be homeowners are finding it difficult to purchase a typical home. You need a six-figure income.
“The Sunbelt has become harder to afford in recent years with the influx of new homebuyers into these areas,” Ostrovsky added.
“That trend has been going on for decades and is getting more intense. The migration shift to the Sunbelt is good for long-term homeowners in these areas.
“Meanwhile, some bargain-seeking buyers are relocating to more affordable markets in the Rust Belt and Midwest.”
Bankrate said aspiring homeowners in the South and Midwest need a minimum income to buy a typical home.
Potential buyers in Mississippi, Ohio, Arkansas, Indiana and Kentucky need an income between $63,043 and $65,186.
Rising mortgage rates are increasing the income required to buy a median-priced home across the country.
Mortgage rates have increased by more than 3 percent in recent years. According to Bankrate, the average 30-year fixed interest rate as of January 2020 was 3.68%.
The average 30-year fixed rate was 6.79% as of March 28, according to the latest data from government-backed lender Freddie Mac.
According to Bankrate analysis, Americans living in Massachusetts need an income of $162,471 to buy a typical home.
The annual income required to buy a typical home increased in every state and the District of Columbia over the past four years, but in some states faster than in others.
Prospective buyers in Montana now need a 77.7 percent higher income to afford a median-priced home than they did four years ago, the largest percentage increase of any state.
Homebuyers in Montana must earn $131,357 annually to cover the state's standard monthly mortgage payment of $3,065.
The median home price in Montana was $507,100 in January 2024, compared to $299,300 in January 2020.
Potential buyers in Utah and Tennessee need to make 70 percent more than they did in January 2020.
Meanwhile, budding homeowners in South Carolina and Arizona need to earn 67% and 65% more, respectively.
| state | Annual income required to purchase a median-priced home |
|---|---|
| California | $197,057 |
| Hawaii | $185,829 |
| District of Columbia | $167,871 |
| Massachusetts | $162,471 |
| Washington | $156,814 |
| colorado | $152,229 |
| new jersey | $152,186 |
| new york | $148,286 |
| Utah | $133,886 |
| rhode island | $132,343 |
| montana | $131,357 |
| new hampshire | $130,329 |
| Oregon | $129,129 |
| connecticut | $119,614 |
| florida | $114,771 |
| vermont state | $114,471 |
| idaho | $114,386 |
| nevada | $111,557 |
| America | $110,871 |
| arizona | $110,271 |
| maryland | $108,257 |
| Virginia | $106,971 |
| maine | $102,557 |
| texas | $100,629 |
| wyoming | $98,486 |
| alaska | $97,800 |
| south carolina | $96,600 |
| georgia | $95,529 |
| tennessee | $94,371 |
| north carolina | $92,657 |
| new mexico | $92,443 |
| minnesota | $91,886 |
| south dakota | $87,686 |
| illinois | $82,586 |
| Delaware | $82,500 |
| nebraska | $82,157 |
| wisconsin | $78,814 |
| pennsylvania | $78,343 |
| west virginia | $74,957 |
| north dakota | $73,414 |
| Kansas | $72,343 |
| Alabama | $69,514 |
| louisiana | $67,886 |
| missouri | $66,986 |
| michigan | $66,343 |
| oklahoma | $65,443 |
| iowa | $65,314 |
| kentucky | $65,186 |
| Indiana | $65,143 |
| arkansas | $64,714 |
| Ohio | $64,071 |
| mississippi | $63,043 |
