Buying a home in nearly half the country requires a six-figure salary — up from six states that required the same income just four years ago, according to a recent report. The analysis by financial services firm Bankrate found that 22 states and Washington, DC, require buyers to make upwards of $110,871 to comfortably afford a median-priced home of $402,343. In 2020, meanwhile, Americans only needed to make a salary that high in six states, as well as the District of Columbia, to afford the average home. Those seeking to buy homes in
California,
HAWAII, DC, Massachusetts and
Washington state need to earn the most to buy a typical home, between $156,814 and $197,057, according to Bankrate’s findings that were earlier reported on by
CNN . In
New York, meanwhile, aspiring homebuyers will need to make nearly $150,000, while New Jersey buyers have to make at least $152,186 per year to afford the average home. “Affordability is the biggest issue,” said Jeff Ostrowski, Bankrate’s housing market analyst. “The higher the price of a home, the harder it is to come up with the downpayment or to qualify for the monthly payment.” At the same time, “homes have become less affordable because home price appreciation has so far outpaced wage growth,” Ostrowski told CNN. Mortgage rates have also skyrocketed since the pandemic — a result of stubbornly high interest rates that make it more expensive for banks to borrow capital. Federal Reserve officials have kept interest rates at their current 22-year high, between 5.25% and 5.5%, since their July 2023 policy meeting. According to Freddie Mac, the average 30-year fixed-rate mortgage rate was a whopping 6.79% as of Thursday — nearly double what it was four years ago.. At the beginning of 2020, mortgage rates averaged around 3.7%. At the same time, the Fed’s benchmark federal funds rate was between 1.5% and 1.75%. Montana saw the heftiest increase in the amount of income needed to afford a home, at 77.7%, followed by increases of more than 70% in
Utah and Tennessee, according to Bankrate. Stay up on the very latest with Evening Update. Please provide a valid email address. By clicking above you agree to the Terms of Use and Privacy Policy . Never miss a story. South Carolina and
Arizona rounded out the top five states where the annual income needed to afford a typical home has increased the most since the beginning of 2020, at 67.3% and 65.3%, respectively. By contrast, aspiring homeowners in Mississippi, Ohio, Arkansas, Indiana and Kentucky need to dish out the least amount of their annual earnings to afford a typical home, between $63,043 and $65,186. Bankrate’s findings are underscored by another recent report from Realtor.com, which found that as of February it’s cheaper to rent a home than buy one in the top 50 metro areas by a staggeringly wide margin. For a so-called “starter home” in any of these sought-after cities — which some have argued no longer exist thanks to sky-high borrowing rates and inflationary housing prices — it costs 60.1% less to lease the property than to own it on a monthly basis, per Realtor.com’s February 2024 Rental Report. On average, the stiff premium for homeownership amounts to roughly $1,027 in monthly costs — though in the most sought-after cities like Austin, Texas; Seattle, and Phoenix, Ariz., that figure more than doubles.