A recent analysis by Bankrate has revealed that only 14 U.S. states are affordable for residents who earn less than $75,000 per year to purchase a median-priced home. This number has significantly dropped from 36 states in just four years, highlighting how rising home prices have shifted homeownership towards the wealthiest Americans. With half of the country’s households earning a median income of $74,580 or less, these 14 states offer a rare opportunity for middle-income earners to afford a typical home. Bankrate calculated homeownership costs for each state based on a 20% down payment, no HOA fees or mortgage insurance, and a 30-year fixed mortgage interest rate of 7.05%.
The 14 states where homes are most affordable include Mississippi, Ohio, Arkansas, Indiana, Kentucky, Iowa, Oklahoma, Michigan, Missouri, Louisiana, Alabama, Kansas, North Dakota, and West Virginia. The annual income needed to cover homeownership costs in these states without spending more than 28% on housing ranges from $63,043 to $74,957. Median-priced homes in these states are priced at $300,000 or less, significantly lower than the U.S. median price of $402,343. However, there are trade-offs to consider in these states, such as higher poverty rates and fewer high-paying job opportunities compared to the rest of the country, as many of them are among the most rural areas in the United States.
In contrast, California stands out as the state with the highest annual income requirement to afford a median-priced home at $739,200, with residents needing to earn $197,057. The current median income needed to afford a home in the U.S. overall is $110,871, a significant increase from $76,191 in 2020. This rise is primarily due to a shortage of homes coupled with supply chain constraints during the pandemic, causing median home prices to increase by 27% and mortgage rates to nearly double since 2020. States like California and New York, with high demand for homes, saw more dramatic price gains compared to rural or Rust Belt states like Mississippi or Michigan, where prices have not increased as much and are relatively more affordable for middle-class earners.
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