Although most people don't earn six figures a year, that has become the new standard for whether or not someone can afford a typical American home.
Americans need to earn $110,871 a year to buy a home with a median price of $402,343, up 46% from January 2020, according to a new analysis of Redfin sales data by Bankrate.
To calculate the cost of homeownership, Bankrate assumes a 20% down payment, no HOA fees or mortgage insurance, and a 30-year fixed mortgage interest rate of 7.05%.
In 2020, an annual income of $76,191 was enough to purchase a median-priced home, as opposed to the six-figure amount needed today. For reference, the current median household income is $74,580, according to the most recent available U.S. Census Bureau data.
This suggests that over the past four years, homeownership has become even more out of reach for most middle-class buyers.
The decline in home affordability reflects a steadily rising cost of homeownership: The median home price has increased 27% since 2020, and mortgage rates have nearly doubled in that time.
As a result, the number of places where you need to earn more than $100,000 to buy a median-priced home has increased from 7 to 23 since January 2020. Here's how much salary you need in these areas:
- 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: $114,471
- Idaho: $114,386
- Nevada: $111,557
- Arizona: $110,271
- Maryland: $108,257
- Virginia: $106,971
- Maine: $102,557
- Texas: $100,629
Four years ago, you needed a six-figure income to buy a typical home only in the nation's most expensive states and territories, which include California, Hawaii, Massachusetts and New York. These states also have the highest percentage of homeowners spending more than 30% of their gross income on housing costs, according to a 2023 LendingTree study.
But as home prices continue to rise, more and more states are making housing unaffordable for the average wage earner.
This includes Utah, Montana and Idaho, which were popular destinations during the pandemic due to their relatively affordable prices. The value these markets once offered has since been offset by skyrocketing home prices. In Montana, the income needed to purchase a median-priced home has increased 77% since 2020, the largest increase of any state.
Rising wages also haven't kept pace with rising home prices: Wages increased 23% between the fourth quarter of 2019 and November 2023, according to the Center for American Progress, which analyzed data from the Bureau of Labor Statistics. That's locking out potential homebuyers who might have been able to buy in 2020.
That said, housing is still affordable in 14 states if you make less than $75,000 a year. Most of these states are in the Midwest or South, and some of the least expensive places to buy a home include Mississippi, Ohio, Arkansas, Indiana, Kentucky, Iowa and Oklahoma.
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