By Mike Winters -
CNBC
There are only 14 U.S. states where residents earning less than $75,000 annually can afford a mid-priced home, a new Bankrate analysis revealed.
Just four years ago you could buy a home with that income in up to 36 states,
illustrating how rising home prices have tipped the balance of home ownership toward wealthier Americans.
Given that half of the country's households earn an average of $74,580 or less, these 14 states are some of the few places where middle-income people can afford a typical home.
To calculate the costs of buying a home in each state in the country, Bankrate assumes that the buyer will make a 20% down payment, with no homeowner's association (HOA) fees or mortgage insurance, and with a 30-year fixed mortgage interest rate. 7.05%. Each state's monthly mortgages are based on average sales price data from online real estate broker Redfin.
These are the 14 states where housing is most affordable, based on the annual income needed to cover the costs of purchasing a home without spending more than 28% on it:
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.
The median home price in these states is $300,000 or less, significantly less than the national median price of $402,343.
Although cheaper housing can be found in these 14 states, some indicators must be taken into account, such as higher poverty rates and fewer well-paying jobs compared to the rest of the country. Many of those states are among the most rural in the United States, and incomes in those areas
tend to be lower than in big cities
.
By contrast, in California you need $197,057 to afford a home with a median price of $739,200, the highest of all states.
The average income needed to purchase a home in the United States overall is $110,871, which has increased from $76,191 in 2020. This is largely due to a long-standing housing shortage, exacerbated by limitations of the supply chain at the beginning of the pandemic. Since 2020, the average home price has risen 27%, while mortgage rates have nearly doubled.
However,
price increases were most dramatic in states where housing demand has
long existed, such as California and New York. Home prices in rural, or so-called Rust Belt, states like Mississippi and Michigan have not risen as much as others, making them relatively more affordable for middle-class workers.