A new study analyzed how rising house prices affect buyers and their incomes.
That means aspiring homeowners will need even more income to buy a home in 2024 than they did before the pandemic, according to an analysis by personal finance website Bankrate.
of analysis They found that buyers in 22 states and Washington, D.C., need a six-figure income to afford a median-priced home. Four years ago, that number was six states and the District of Columbia.
According to Bankrate, the median price home is $402,343. To afford that price, a buyer would need an annual income of $110,871. This is a 46% increase from the beginning of 2020, when homebuyers only needed an annual income of $76,191.
“With home prices near all-time highs, if you want a home, you have little choice but to pay a higher price,” Bankrate housing market analyst Jeff Ostrovsky said in a statement.
In January, S&P CoreLogic Case-Shiller U.S. National Housing Prices NSA Index According to the report released on March 26, the index recorded an annual increase of 6%. The index rose 5.6% from the previous month.
The report showed that prices have increased annually for the second month in a row.
As of the week ending March 28, Average 30-year fixed rate mortgage 6.79%, up from an average of 6.32% for the same period in 2023, according to Freddie Mac data.
Homebuyers in the West and Northeast have the highest income needs, according to Bankrate. This correlates with rising home prices in states in the West and Northeast, and declines in states in the South and Midwest.
For buyers in California, Hawaii, the District of Columbia, and Massachusetts, a “typical home” requires an annual income of $156,814 to $197,057. Buyers in the South and Midwest require a minimum income. An annual income of $63,043 to $65,186 is all you need to buy a home in Mississippi, Ohio, Arkansas, Indiana, and Kentucky.
Since 2020, the annual income required to buy a home has increased the most in Montana by 77.7%, Utah by 70.3%, Tennessee by 70.1%, South Carolina by 67.3%, and Arizona by 65.3%.
The smallest increases since 2020 were in North Dakota at 9.2%, the District of Columbia at 24.6%, Louisiana at 24.9%, Illinois at 27.2%, and Kansas at 29.3%.
Price is the biggest issue facing prospective home buyers.
“The biggest issue is affordability. Finding a home within your budget,” Ostrovsky said. “The more expensive a home is, the harder it is to come up with a down payment or qualify for a monthly payment.”
According to Bankrate, the main cause of this challenge is the disparity between wages and housing prices.
Rising mortgage rates and a lack of homes for sale are exacerbating the problem.
“Over the past few years, housing supply has been constrained by a number of factors, including weak housing construction and lock-in effects,” Ostrovsky said. “However, demand for housing is increasing and there are more buyers than sellers.”
Buyers looking for more affordable options should consider the Rust Belt and Sunbelt, “the most affordable housing regions in the country.”
Ostrovsky said a decades-long trend of immigration into the Sunbelt has made home prices higher than they used to be, but it's still a good option for “long-term homeowners.” Bargain seekers can also find affordable markets in the Midwest.
