American home buyers need to be earning more than $150,000 annually to afford a median-priced home in six states across the country, as well as the nation's capital, according to a recent analysis by consumer financial services company Bankrate.
California requires the highest salary, where would-be property owners need to be earning $197,057 per year to buy a typical home, followed by Hawaii ($185,829), Washington, DC ($167,871), Massachusetts ($162,471), Washington state ($156,814), Colorado ($152,229) and New Jersey ($152,186).
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Bankrate's analysis also found that those looking to buy a home in 16 other states would need a six-figure salary, around three times as many states as four years ago.
Montana, Utah, Tennessee, South Carolina and Arizona saw the biggest increase in income needed to afford a median-priced home. The increase was over 65 percent in all five states. Between 2020 and 2021, those states saw some of the largest population percentage increases, according to the US Census Bureau. Conversely, in some states that saw large population declines, like North Dakota, Illinois and Louisiana, there was little change in the salary needed to afford a typical home.
"It's all about home price appreciation," said Bankrate housing market analyst Jeff Ostrowski. "The states with the most dramatic increases in income needed to afford a home have experienced above-average appreciation in recent years, while those at the bottom of the list have seen much more modest rises in home prices."
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The jump in income needed to afford a home compared to four years ago coincides with a sharp increase in mortgage rates and house prices. During the pandemic, interest rates fell below 3 percent. Now, the national average for a 30-year fixed mortgage is hovering near 7 percent. Home prices have risen 42.2 percent since January 2020, according to research by real-estate site Zillow.
Across the United States on average, home buyers need an annual income of $110,871 to afford a median-priced home, which Bankrate calculates as costing $402,343 and having a $2,587 monthly mortgage payment.
The median household income in the United States is $74,755, according to the US Census Bureau.
"Affordability is the biggest issue," said Ostrowski. "The higher the price of a home, the harder it is to come up with the down payment or to qualify for the monthly payment."
Housing becomes more affordable in the Midwest and the South, where earnings of at least $63,000 are necessary to afford typical homes in Mississippi, Ohio, Arkansas, Indiana and Kentucky.
"If you're ready to buy, then buy," said Ostrowski in the Bankrate report. "There's no guarantee that the market will become more favorable for buyers."
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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