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Since 2020, it has become extremely difficult for many people to purchase affordable housing in the United States.
A new Bankrate.com analysis finds that in 22 states and Washington, D.C., buyers need a six-figure household income to comfortably afford a median-priced home. Ta.
This is significantly higher than in January 2020, when Bankrate determined that buyers in just six states and the District of Columbia needed a six-figure income.
“Home price growth has historically outpaced wage growth, making housing unaffordable,” said Jeff Ostrowski, an analyst at Bankrate. “Why have house prices risen so quickly? It's because of supply and demand.”
He said there was less housing supply to meet buyer demand, both due to lower home construction and the “lock-in effect” of rising mortgage rates and house prices. Ta.. These factors make existing homeowners reluctant to sell because it is more expensive to buy a new home.
Of course, how you define “affordable” varies widely, and depends on the buyer's financial situation, including not just their income but also their savings, whether they have significant other debts or own other real estate. very different. It's also important to know whether you have enough money left over after purchasing a home to pay for its upkeep in addition to all other costs.
Bankrate.com's analysis made several prudent assumptions and evaluated affordability strictly in terms of mortgage payments (including principal, interest, property taxes, and property insurance). However, this does not take into account closing costs, which vary widely depending on the lender, loan type and location of the home. Additionally, the costs of housing maintenance and non-housing items were not taken into account.
Specifically, the analysis assumed that the buyer made a 20% down payment and took out a 30-year fixed-rate mortgage at a 52-week average interest rate. We also assumed that mortgage payments do not exceed 28% of annual gross income.
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Based on that, Bankrate found that in the U.S., where the overall median home price is $402,343, according to Redfin, “a prospective homebuyer would have to earn $110,841 a year to afford a median-priced home.” I calculated that it must be done. (The median sales price in an area is the price at which half of the homes for sale are sold at a higher price and half are sold at a lower price.)
Of course, national averages, and for that matter state averages, provide extensive information about trends in housing affordability, but real estate values have always been about “location, location, location.”
Bankrate said shoppers on the West Coast and Northeast need the highest household incomes to buy a typical home. The top five are:California (income Hawaii ($185,829); District of Columbia ($167,871); Massachusetts ($162,471). and Washington State ($156,814).
Other states that require a six-figure income are: Arizona ($110,271). Colorado ($152,229); Connecticut ($119,614). Florida ($114,771). Idaho ($114,386); Maine ($102,557); Maryland ($108,257). Montana ($131,357). Nevada ($111,557). New Hampshire ($130,329). New Jersey ($152,186). New York ($148,286). Oregon ($129,129). Rhode Island ($132,343). Texas ($100,629); Utah ($133,886); Vermont ($114,471). and Virginia ($106,971).
In contrast, states in the South and Midwest require a minimum level of income to afford median-priced housing. Ohio ($64,071); Arkansas ($64,714). Indiana ($65,143). and Kentucky ($65,186).
Six-figure incomes aside, a measure of how affordability changes over time is how much more you need to earn today than you did yesterday to buy the average home. there is.
Compared to 2020, the fastest increase in income needs was in Montana (77.7% increase). Utah (up 70.3%); Tennessee (up 70.1%), South Carolina (up 67.3%), Arizona (up 65.3%).
“The Sunbelt has become more affordable with the influx of new homebuyers into these areas in recent years,” Ostrovsky said. “That trend has been going on for decades and is getting more intense.”
But there are still some deals left in the Rust Belt and Midwest, he added. For example, Bankrate found that North Dakota required the least increase in income to purchase a median-priced home (9.2% increase). Illinois (27.2% increase); Kansas (29.3% increase).
Full Bankrate analysis can be found here.
Correction: An earlier version of this article incorrectly reported the required household income for home buyers in California. That's $197,057.
