There are only 14 U.S. states where residents earning less than $75,000 can afford a median-priced home, a new Bank Rate analysis reveals.
That number rose from 36 in just four years, illustrating how rising housing prices have tipped the scales of homeownership in favor of wealthier Americans.
Since half of the nation’s households earn an average of $74,580 or less, these 14 states are among the few places where middle-income people can afford a typical home.
To calculate the costs of homeownership in each U.S. state, Bankrate assumes a 20% down payment, no homeowners’ association (HOA) fees or mortgage insurance, and a 30-year fixed mortgage interest rate of 7.05%. Monthly mortgage payments for each state are based on median sales price data from online broker Redfin.
Here’s a look at the 14 states with the most affordable housing, based on the annual income needed to cover the costs of homeownership without spending more than 28% on housing.
- 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
- West Virginia: $74,957
Median-priced homes in these states cost $300,000 or less, a significant reduction from the U.S. median price of $402,343.
While these 14 states may offer cheaper properties, there are tradeoffs to consider, such as higher poverty rates and fewer good-paying jobs compared to the rest of the country. Many of them are among the most rural in the United States, and incomes in rural areas tend to be lower than those in large urban cities.
In contrast, you would need to earn $197,057 to afford a median-priced home worth $739,200 in California – the highest of any state.
The median income needed to afford housing in the United States is overall $110,871, up from $76,191 in 2020. This is largely due to a long-standing housing shortage that has been exacerbated by housing constraints. the supply chain at the start of the pandemic. Since 2020, median home prices have increased 27%, while mortgage rates have nearly doubled.
However, price increases have been more dramatic in states where housing demand has existed for a long time, such as California and New York. Housing prices in rural or Rust Belt states like Mississippi or Michigan haven’t risen as much as in others, making them relatively more affordable for middle-class earners.
Want to earn extra money outside of your day job? Register for CNBC’s New Online Course How to Earn Passive Income Online to learn more about common passive income streams, tips for getting started, and real-life success stories. Sign up today and save 50% with discount code EARLYBIRD.
More, sign up for the CNBC Make It newsletter for tips and tricks for success at work, with money and in life.
cnbc
