In these 22 states, it takes a six-figure income to afford a typical home, according to an analysis

(CNN) — Purchasing an affordable home has become much more difficult for many people in the United States since 2020.

A new analysis from Bankrate.com shows that in 22 states and the capital Washington, buyers need a six-figure household income to comfortably afford a typical moderately priced home.

That’s up from January 2020, when Bankrate found that buyers only needed a six-figure income in six states and the District of Columbia.

“Homes have become less affordable as rising home prices have outpaced wage growth,” said Jeff Ostrowski, an analyst at Bankrate. “Why have housing prices increased so quickly? Blame supply and demand.”

The supply of homes has fallen short to meet buyer demand, he said, because home construction is down, and also because of the “lock effect” of high mortgage rates and home prices. These factors make home owners reluctant to sell because buying a new home will cost them more.

Did you lose your house? American home buyers in many areas today need much higher incomes than in 2020 to afford a median-priced home where they live. (Credit: Grace Carey/Moment RF/Getty Images)

What does “affordable” mean?

Of course, the definition of “affordable” can vary widely and depends largely on the buyer’s financial circumstances, not only their income, but also their savings and whether they have a lot of other debt or have other assets. Are. And it also matters whether one has enough money left after buying a house to afford its maintenance apart from all his other bills.

Bankrate.com’s analysis made some cautious assumptions, evaluating affordability strictly from the perspective of mortgage payments (which include principal, interest, taxes and homeowner’s insurance). But this doesn’t take into account closing costs, which vary greatly depending on the lender, the type of loan and the location of the home. House maintenance expenses and costs of other items were also not taken into account.

Specifically, the analysis assumed buyers put 20% down and took out a 30-year fixed-rate mortgage at an average interest rate of 52 weeks. Mortgage payments also should not exceed 28% of your gross annual income.

Based on this, Bankrate calculated that in the United States – where the overall median home price is $402,343, according to Redfin – “aspiring home buyers would have to earn $110,841 annually to afford the median priced home.” (The median sales price in an area is the price at which half of the homes for sale are priced higher and half are priced lower.)

Of course, while national averages – or state averages for that matter – can provide an overview of trends in housing affordability, they don’t say much about the neighborhood you’re looking at, as real estate values ​​always do. Comes with “location, location, location”.

Where you need the highest and lowest income to buy a moderately priced home

According to Bankrate, buyers on the West Coast and Northeast need the highest household income to purchase a typical home. The top 5 places are: California (where an income of US$197,051 is required); Hawaii (US$185,829); District of Columbia (US$167,871); Massachusetts ($162,471); and Washington State (US$156,814).

Other states that require a six-figure income: Arizona ($110,271); Colorado (US$152,229); Connecticut ($119,614); Florida (US$114,771); Idaho ($114,386); Maine ($102,557); Maryland ($108,257); Montana (US$131,357); Nevada (US$111,557); New Hampshire ($130,329); New Jersey ($152,186); New York (US$148,286); Oregon ($129,129); Rhode Island ($132,343); Texas (US$100,629); Utah ($133,886); Vermont ($114,471); and Virginia (US$106,971).

In contrast, states in the South and Midwest require the lowest income levels to purchase a median-priced home: Mississippi (US$63,043); Ohio (US$64,071); Arkansas ($64,714); Indiana ($65,143); and Kentucky (US$65,186).

Where income requirements have increased the most (and least) since 2020

Beyond six-figure incomes, changes in affordability over time can sometimes be measured by how much more income you need to buy an average home today than you did yesterday.

Compared to 2020, Montana had the largest increase in income requirements (up 77.7%); Utah (up 70.3%); Tennessee (up 70.1%), South Carolina (up 67.3%), and Arizona (up 65.3%).

“The Sun Belt (which extends from the Atlantic Coast of the Southeast to the Pacific Coast of the Southwest) has become less affordable in recent years amid an influx of new home buyers into those areas,” Ostrowski said. “This trend has been going on for decades, and it has intensified.”

But, he added, there are still some deals to be done in the Rust Belt and Midwest. For example, Bankrate found that the income needed to purchase a median-priced home grew the least in North Dakota (9.2%), Illinois (27.2%), and Kansas (29.3%).

Bankrate’s full analysis can be found here.