How Much Income You Need To Afford the Average Home In Every State

The housing market has not only recovered its pre-recession levels, but some observers are actually starting to worry about yet another housing bubble. Housing prices are on the rise, thanks in large part to extremelytight inventory, so it’s worth asking:  are potential home buyers getting priced out of the market? The answer depends on where they live and how much money they make.

HowMuch.net  collected average home prices for every state from Zillow which we then plugged into a mortgage calculator to figure out monthly payments. Remember, mortgage payments consist of both the principal and the interest for the loan. The interest rate we used varied from 4 to 5% in each state, depending on the market. The lower the interest rate, the lower the monthly payment. To keep things simple, we assumed buyers could contribute a 10% down payment. Another thing to keep in mind is that financial advisors commonly recommend the total cost of housing take up no more than 30% of gross income (the amount before taxes, retirement savings, etc.). Using this rule as our benchmark, we calculated the minimum salary required to afford the average home in each state.

Source: HowMuch.net

Top Five Places Where You Need the Highest Salaries to Afford the Average Home

1. Hawaii: $153,520 for a house worth $610,000

2. Washington, DC: $138,440 for a house worth $549,000

3. California: $120,120 for a house worth $499,900

4. Massachusetts: $101,320 for a house worth $419,900

5. Colorado: $100,200 for a house worth $415,000

Top Five Places Where You Need the Lowest Salaries to Afford the Average Home

1. West Virginia: $38,320 for a house worth $149,500

2. Ohio: $38,400 for a house worth $149,900

3. Michigan: $40,800 for a house worth $160,000

4. Arkansas: $41,040 for a house worth $161,000

5. Missouri: $42,200 for a house worth $165,900

Our map creates a quick snapshot of housing affordability across the United States. There are several pockets in which only the upper middle class and above can afford to own even the average home, most notably across the West and in the Northeast. There are only two states west of the Mississippi River where a worker with an annual salary under $40,000 can afford a mid-level home:  Missouri and Oklahoma. Colorado stands out as the only landlocked state requiring a significant amount of income ($100,200), thanks in large part to the housing market around Denver.

Homes tend to be more affordable in the eastern half of the country, with a notable pocket of “green” (less expensive) states located in the upper Midwest. The North is generally more affordable than the South and the typical home is significantly easier to buy in places like Michigan or Ohio than in Louisiana or Arkansas.  Additionally, our map indicates that workers can more easily afford homes in the East than in the West, which is surprising given how much more land is available out West. It is important to note that there are certainly deep pockets of poverty in all of these places, which suggests that our map obscures the inequality behind averages.

The best takeaway from our map is that housing remains affordable in large swaths of the country, even though there will always be places like California and New York where there is simply too much demand for the available inventory. Thankfully, that doesn’t mean that buying a home is suddenly out of reach for average Americans in Ohio or Mississippi, for example.

Source: HowMuch.net

Comments

RAT005 ACP Thu, 04/05/2018 - 21:14 Permalink

And from my experience, about 65% those salaries after the house is paid for to live comfortably and keep it.  And 65% of those salaries is still pretty difficult for many (most?) people to achieve.

Their chart is "qualifying."  Comfortable is the house costing 3x salary so actually the affordability is much worse.  Their chart is about 4x.

In reply to by ACP

ThanksChump gatorengineer Fri, 04/06/2018 - 06:51 Permalink

Another consideration is the P:P ratio. Price/Population-density.

 

When the house of cards collapses, or disaster strikes, how many people will you be competing with, face-to-face, for scarce resources?

 

Economic collapse will affect those living in Baltimore a lot differently than those living in WV or KY. Devastating in Baltimore == Still-Fuckin'-Broke/SSDD in central PA.

In reply to by gatorengineer

philosobilly Midas Thu, 04/05/2018 - 23:53 Permalink

ahhh but there isnt, the federal govt owns most of the west outright, arguably illegally. the federal govt per the constitution is only supposed to own land necessary to carry out its most basic functions, common defense, forgien trade, protecting the citizens liberty from encroahment on their individual state govts, countries within a formerly confederal, now federal republic, usually mislabeled a country. after napolean sold jefferson the lousiana purchase and the west was slowly settled when states, countries, wanted to enter the union, the republic, the had to volutarily give up huge huge huge tracks of land to the fed as a oath of fielty. check out a public land map of the us itll blow your mind how much of the country the fed owns. oh well i guess out of all the shit that dc does that is totally immoral and illegal thats probably the least of it. imagine selling all public land to pay off the national debt, or raise money to go to mars instead of syria. imagine how much the fed molests property values by paying farmers to grow certain crops, attaching that sweet govt contract to a certain plot of land. man i could go on.

In reply to by Midas

Dennisen Thu, 04/05/2018 - 21:00 Permalink

30%? Most Californians like myself (once) allot closer to 65-70% towards a house payment. Goes to show what the American Dream has become.

Blankone Thu, 04/05/2018 - 21:42 Permalink

The article does not appear to include the amount and differences in taxes on a house.
It can be more significant that some realize, depending on location.

Manipuflation Thu, 04/05/2018 - 21:44 Permalink

Who wants the risk that you get laid off or your company restructures and closes your branch down and then it's relocation time?  What about mergers and acquisitions?  I've done this several times but with apartments.  Not only that, some higher paying companies actually expect you to be mobile.

I've even switched from B2B wholesale to retail and it's the same thing with the jobs aspect.  You never really own real estate anyway, the bank does or if not those assholes then try not paying your property taxes.

Homes are great for some things but not enough to outweigh the risks for me.  City homes are boat anchors.