In those 22 states, a person would need a six-figure income to buy a typical home, according to the analysis.
Updated: April 6, 2024, 12:21 PM ET
Buying an affordable home in the United States has become much harder for many people since 2020. According to a new analysis from Bankrate.com, in 22 states and Washington, D.C., buyers need a six-figure household income to comfortably buy a typical median-priced home. That's much higher than in January 2020, when Bankrate reported that in only six states and the District of Columbia, buyers needed a six-figure income. “Housing is becoming less affordable as home price growth has so far outpaced wage growth,” said Jeff Ostrovsky, an analyst at Bankrate. “Why have home prices risen so quickly? It's because of demand and supply.” Both the decline in home construction and the “lock-in effect” of rising mortgage rates and home prices are reducing the supply of homes to meet buyer demand, he said. These factors make existing homeowners hesitant to sell because it's too expensive to buy a new home. What “affordable” means Of course, the definition of “affordable” is wide-ranging and very specific to the buyer's financial situation: not just income but savings, whether they have a lot of other debt or own other properties, etc. It's also important to consider whether you'll have enough money left over after purchasing a home to cover maintenance costs on top of all your other payments. Bankrate.com's analysis assessed affordability strictly in terms of mortgage payments (including principal, interest, property taxes, and property insurance) based on several conservative assumptions. However, it didn't take into account closing costs, which vary widely by lender, loan type, and home location. It also didn't take into account home maintenance or non-housing costs. Specifically, the analysis assumed buyers would make a 20% down payment and take out a 30-year fixed-rate mortgage with a 52-week average interest rate. It also assumed that mortgage payments would not exceed 28% of annual gross income. Based on this, Bankrate calculated that in the United States (where the overall median home price is $402,343, according to Redfin), “prospective homebuyers would need an annual income of $110,841 to purchase a median-priced home.” (The median sales price in an area is the price at which half of the homes for sale are priced above that price and half are priced below that price.) Of course, the national average (or state average) gives you a rough idea of home affordability trends, but it doesn't tell you much about the area you're looking in, since real estate values are always “location, location, location.” Where You Need the Most and the Least to Afford a Median-Priced Home According to Bankrate, buyers on the West Coast and Northeast need the highest household income to afford a typical home. The top five locations are: California (need to earn $197,051), Hawaii ($185,829), District of Columbia ($167,871), Massachusetts ($162,471), and Washington ($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, Southern and Midwestern states had the lowest income levels needed to buy a median-priced home: Mississippi ($63,043), Ohio ($64,071), Arkansas ($64,714), Indiana ($65,143), and Kentucky ($65,186). Where income needs have increased the most (and least) since 2020 Six-figure incomes aside, we may be able to see a measure of how affordability changes over time by looking at how much more income is needed today than yesterday to buy the average home. Compared to 2020, Montana (up 77.7%), Utah (up 70.3%), Tennessee (up 70.1%), South Carolina (up 67.3%), and Arizona (up 65.3%) saw home price increases. “The Sun Belt has seen a surge in new homebuyers and higher home prices in recent years,” Ostrowski said. “This trend has been going on for decades and is getting stronger.” But there are still bargains to be found in the Rust Belt and Midwest, he added. For example, Bankrate found that the income needed to buy a median-priced home rose the least in North Dakota (up 9.2%), Illinois (up 27.2%) and Kansas (up 29.3%). You can see Bankrate's full analysis here.
After 2020, buying affordable housing in the United States has become extremely difficult for many people.
A new analysis from Bankrate.com finds that in 22 states and Washington, D.C., buyers need a six-figure household income to comfortably afford a median-priced home.
That's significantly more than just six states and the District of Columbia, where Bankrate reported in January 2020 that buyers needed a six-figure income.
“Home price growth has outpaced wage growth so far, making housing more unaffordable,” said Jeff Ostrowski, an analyst at Bankrate. “Why have home prices risen so quickly? It's supply and demand.”
He said the supply of homes to meet buyer demand is shrinking due to both a decline in homebuilding and the “lock-in effect” of rising mortgage rates and home prices.. These factors make existing homeowners hesitant to sell because it will cost more to buy a new home.
What does “affordable” mean?
Of course, the definition of “affordable” varies widely and depends heavily on the buyer's financial situation — not just their income but also their savings, whether they have significant debt, whether they own other properties, and whether they have enough money left over after purchasing the home to cover all their other bills and maintenance costs.
Bankrate.com's analysis assesses affordability strictly from the perspective of mortgage payments (including principal, interest, property taxes and property insurance) based on several conservative assumptions, but does not take into account closing costs, which can vary widely depending on the lender, loan type and location of the home. It also did not take into account the costs of maintaining the home or other non-housing expenses.
Specifically, the analysis assumed that buyers would make a 20% down payment and take out a 30-year fixed-rate mortgage with a 52-week average interest rate. It also assumed that mortgage payments would not exceed 28% of annual gross income.
Using this, Bankrate calculated that while the median home price in the US is $402,343 (according to Redfin), “a potential homebuyer would need to earn $110,841 a year to purchase a median-priced home.” (The median sales price in a given area is the price above which half of the homes for sale are priced, and the other half are priced below.)
Of course, national or even state averages can give you a rough idea of home affordability trends, but they don't tell you much about the area you're looking in, as property values are always determined by “location, location, location.”
Where you need to earn the most and least to buy a median-priced home
According to Bankrate's research, homebuyers on the West Coast and Northeast need the highest household income to purchase a typical home. The top five regions are: California ( The required amount is $197,051), Hawaii ($185,829), the 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, Southern and Midwestern states have the lowest income levels needed to purchase a median-priced home: Mississippi ($63,043), Ohio ($64,071), Arkansas ($64,714), Indiana ($65,143), and Kentucky ($65,186).
Regions that have seen the biggest (or least) increase in needed income since 2020
Six-figure incomes aside, how much more income you need today than you needed yesterday to buy the average home may indicate how your ability to buy a home changes over time.
Compared to 2020, the states with the largest increases in income requirements were Montana (77.7% increase), Utah (70.3% increase), Tennessee (70.1% increase), South Carolina (67.3% increase) and Arizona (65.3% increase).
“Home prices have skyrocketed in the Sunbelt over the past few years as new homebuyers have flown into the region,” Ostrowski said. “This trend has been going on for decades and is intensifying.”
But there are still some bargains to be found in the Rust Belt and Midwest, he added. For example, Bankrate found that the states with the smallest increases in income needed to buy a median-priced home were North Dakota (up 9.2%), Illinois (up 27.2%) and Kansas (up 29.3%).
You can see the full Bankrate analysis here.
