With the increase in cost of living and mortgages at an all-time high, finding affordable housing seems like a dream most Americans are not destined to achieve. Out of fifty states only fourteen of them have been deemed as still allowing a person earning less than $75,000 to purchase a median-priced home.
In a new Bankrate analysis, the global situation of the housing market was evaluated, and it is looking fairly bleak. Four years ago, the states that fulfilled the same conditions, median-priced home, and earning less than $75,000 were thirty-six. The number has dropped almost by a third and the situation is not getting any better.
The analysis has taken into consideration a multitude of factors, like the fact that currently half of the country’s households earn a median of $74,580 or less, an assumption of a required 20% down payment, a home located outside of a homeowner association (HOA) to discount the payment of extra fees and a 30-year fixed mortgage interest rate of 7.05% (lower than it is today) that does not require mortgage insurance.
The monthly payments were based on the median sale price data from online broker Redfin (sale price, not listing price, as some states are known to price their properties lower to encourage bidding) and were taken into account in every state to account for the different regions. Another one of the conditions taken into consideration was the fact that housing is meant to be less than 30% of your take home pay, so the states selected were the ones where the annual income or the homebuyer could cover the costs bellow that number.
The least expensive states
From least to most income needed we find Mississippi: $63,043, Ohio: $64,071, Arkansas: $64,714, Indiana: $65,143, Kentucky: $65,186, Iowa: $65,314, Oklahoma: $65,443, Michigan: $66,343, Missouri: $66,986, Louisiana: $67,886, Alabama: $69,514, Kansas: $72,343, North Dakota: $73,414 and West Virginia: $74,957
In these states, median-priced homes cost $300,000 or less, still a decent amount of money, but nothing compared to the U.S. median price of $402,343 and seeming even less when considering states like California. There, you would need a salary of at least $197,057 to afford a median-priced home worth $739,200. This analysis illustrates the impossibility of many Americans to access the housing market and being priced out of their home states, reserving homeownership as an achievement for only the wealthiest tax brackets.
The tradeoff seems to be clear. The states where the cheaper properties are available have higher rates of poverty, less high-paying jobs, more rural populations and less services and commodities available. Hospitals, shops, entertainment and other everyday life occurrences are harder to come by or get to and schools are not as easily accessible for children. This is usually why the incomes in these areas are usually lower but so is the cost of living.
Still, many Americans are wondering if the tradeoff could be worth it to own property. The median income in the U.S necessary to pursue home ownership is $110,871. This is a significant jump from the $76,191 in 2020. The pandemic also influenced the housing market in an unprecedented manner. With the rise of remote work, the location of housing was not as key to many, who moved to less convenient locations with a better quality of life, turning the market on its head and making the prices of homes across the country rise by 27%. Combined with the doubling of mortgage rates, even the most affordable homes in the cheapest states are a commodity not many can afford.
This is even more noticeable in states where homes are in high demand and often short supply, like California and New York. There, prices have not just gone up, but they have skyrocketed in the last few years with no sign of coming back down. Rural states like Mississippi or Michigan have remained bastions of affordable housing.
Read More: The 11 states where you can buy a home if your salary is less than $70,000